Preamble

The House met at half-past Two o'clock

PRAYERS

[Mr. SPEAKER in the Chair]

PRIVATE BUSINESS

MEXBOROUGH AND SWINTON TRACTION BILL [Lords]

As amended, considered; to be read the Third time.

Oral Answers to Questions — MINISTRY OF DEFENCE

British Forces, Malaya

Mr. Brockway: asked the Minister of Defence if British troops will be withdrawn from Malaya on 31st July when the 12-year state of emergency is to be ended.

Mr. Rankin: asked the Minister of of Defence if he proposes maintaining United Kingdom military forces in Malaya at their present strength after the ending of the emergency on 31st July, 1960.

The Minister of Defence (Mr. Harold Watkinson): Her Majesty's Government in the United Kingdom welcome the announcement by the Government of the Federation of Malaya that the state of emergency is formally to end, but this will make no difference to the present arrangements under which, by virtue of the Defence Agreement concluded with the Federation Government in 1957, United Kingdom forces are stationed in their territory.

Mr. Brockway: While I am sure the whole House will agree with the right hon. Gentleman in welcoming the end of the emergency, could he explain the reason for retaining British troops in Malaya? The jungle warfare is over. Is there some other reason? Is it not

a fact that Malaya is not a party to the S.E.A.T.O. Agreement? Why should British troops be there?

Mr. Watkinson: The answer is quite simple. First of all, there are some border security operations in which the Malayan Government wish to have our help. Also, there is the general problem of the external defence of Malaya, which is covered by the Agreement which I cited.

Mr. Rankin: As the troops are being maintained because of the 1957 Agreement, can the right hon. Gentleman tell us whether the 50,000 troops we have now in Malaya was 50,000 in 1957? Was not the figure then less? If it was less, why should we not revert at least to the 1957 number?

Mr. Watkinson: The hon. Gentleman knows that one never quotes these numbers—from my point of view anyway. He may have his own views on the subject.

Mr. Wigg: Perhaps I might help the right hon. Gentleman. He is obviously in some difficulty in giving a figure. Is it not true that there are nothing like 50,000 troops there, because we have not go 50,000 troops to go anywhere?

Germany (Co-operation)

Mr. Warbey: asked the Minister of Defence if he will make a comprehensive statement on British co-operation with the German Federal Republic in the development and production of armaments.

Mr. Watkinson: Full statements about co-operation with the German Federal Republic on the development and production of armaments have been made in recent months by my right hon. Friend the Minister of Aviation and myself. There is nothing new to add to these.

Mr. Warbey: Can the right hon. Gentleman state specifically the range of the surface-to-surface missile which is being developed jointly between this country and West Germany, and whether its range comes within the limits laid down for Western Germany in the Brussels Treaty as it stands at present?

Mr. Watkinson: I can certainly tell the hon. Gentleman that the Brussels Treaty has been, and will be, fully


honoured. As to details about particular weapons, perhaps he will put a Question on the Order Paper.

National Service

Mr. Rankin: asked the Minister of Defence whether it is still his policy to terminate conscription by 1962.

Mr. Watkinson: Yes, Sir.

Mr. Rankin: Can the right hon. Gentleman say at which target he is aiming—165,000 or 182,000? Even supposing he achieves either figure, which does not look likely because of the fall in recruiting, will he still maintain forces in Malaya, Kenya, Cyprus and all the other places, plus the necessary reserve in this country? How will he approach the problem if conscription should fail?

Mr. Watkinson: I am grateful to the hon. Gentleman for asking this question because it enables me to say that, as clearly stated in the 1957 White Paper, the target which the Government then set for Army recruitment was 165,000. Equally, it was said that if additional recruits could be obtained, they could build up to the other figure-182,000. present recruiting trends—they are not as good for the Army as I should like, although they are satisfactory for the two other Services—still show that the figure of 165,000, which is the Government's target figure, is clearly within reach. As to the question about how the Army should be disposed about the world, we may have different views on that.

Mr. Paget: When the figure of 165,000 was originally mentioned, it was suggested that this was the figure we expected to get, not the one which we needed. When the right hon. Gentleman gives an emphatic answer "Yes", does that mean that, whether it is 180,000 or 165,000 or any other figure, regardless of any fresh requirements, we shall make do with what we get?

Mr. Watkinson: It means that in the Defence White Paper it was clearly stated that the target required by the Army to meet our commitments was 165,000. What I have just said is that Present recruiting trends still give us that figure at the due date.

Mr. Wigg: asked the Minister of Defence whether the condition laid down in paragraph 48 of the 1957 Defence White Paper, Command Paper No. 124, that if voluntary recruiting fails to produce the numbers required, the country will have to face the need for some form of compulsory service to bridge the gap, still remains the policy of Her Majesty's Government; and whether he will make a statement.

Mr. Watkinson: Yes, Sir. We have, however, no plans for the continuance of the call-up after this year.

Mr. Wigg: I did not hear the first part of the right hon. Gentleman's Answer.

Mr. Watkinson: It was, "Yes, Sir,"

Mr. Wigg: The undertaking still stands. Does the right hon. Gentleman recall that in an earlier answer today he said he expected to get his targets? Will he give an assurance to the House and to the nation that he expects to get those figures and that he pledges his reputation on getting the numbers for the Army and for the Air Force?

Mr. Watkinson: I think that the reputations of all Ministers stand on their doing what they say they will do. [Interruption.] The right hon. Member for Belper (Mr. G. Brown) only gives me a chance again to wish him the best of success with his new defence policy and to hope that he will feel much better when he has got it out of his system. The answer to the hon. Member for Dudley (Mr. Wigg) is that I am satisfied that on the present recruiting figures we shall get the 165,000.

Mr. V. Yates: Will the Minister bear in mind that, in resisting any attempt to continue compulsory military service beyond the agreed date, he will have the support of millions of people who resent and have for a number of years resented compulsory military service?

Mr. G. Brown: May I, in the spirit of helpful co-operation, thank the Minister for his advance publicity and ask him whether I heard him correctly? Did he say that on present figures, that is, including the latest we had in April, he is satisfied that the Army will get 165,000 men by the time national conscription is completely ended?

Mr. Watkinson: I said, on present trends.

Commitments, Cyprus

Mr. Thorneycroft: asked the Minister of Defence what was the date upon which the last commitment for work to be earned out on the base in Cyprus was entered into; what was the cost of this commitment; and whether he will undertake that no further commitments are entered into until agreement is reached on the future of the base.

Mr. Watkinson: Commitments for work in Cyprus were entered into on 16th and 17th June to a value of about £230,000. Whilst I fully recognise the point my right hon. Friend has in mind, I think it is better to preserve freedom of action about further commitments.

Mr. Thorneycroft: Does my right hon. Friend realise that this is rather like spending money on a house before having even signed a lease, let alone got hold of the freehold? Will he at least give an undertaking that no further commitments will be entered into unless agreement is reached on the future of the bases?

Mr. Watkinson: It can be said that the freehold—to follow my right hon. Friend's metaphor—was clearly determined by the agreement between the Greek, Turkish and British Governments, but perhaps he would like to know that these additional commitments which I have just mentioned are contracts which were placed under commitments previously entered into, and, therefore, I think we should complete them.

Mr. de Freitas: Is it not a fact that the Services, particularly the Royal Air Force, have spent enormous sums without having security of tenure? Surely it is time that this was seen in the perspective of overseas bases generally and not merely as a little local difficulty—to use another metaphor?

Mr. Watkinson: I am not quite sure what the hon. Gentleman means. Does he mean that we should spend no more money in Cyprus or that we should go on with our planned programme?

Mr. G. Brown: Whatever the validity of the Minister's reply to his right hon. Friend the Member for Monmouth (Mr. Thorneycroft), how does it matter if the money is spent on commitments entered

into some time previously if in fact we do not know, when we have spent the money, whether we shall be able to make use of the facilities we are building? It is that point that the Minister should answer.

Mr. Watkinson: I have already answered it. Our right to the base areas was clearly settled by the Zurich Agreement.

Mr. Brown: Is the right hon. Gentleman saying that, whatever the outcome of the discussions in Cyprus, the Government will enforce rights which they claim they have? Is he, therefore, announcing to the Cypriots that it does not really matter about these negotiations?

Mr. Watkinson: I am sure the right hon. Gentleman does not want to make difficult negotiations even more difficult. I said that it was in the interests of Cypriot unemployment that we should go on with the programme—[HON. MEMBERS: "Oh."]—certainly, and therefore we are implementing the commitments which we have entered into. That is perfectly right.

Skybolt Missile

Mr. Warbey: asked the Minister of Defence what will be the estimated cost of British participation in research in, and development of, the United States Skybolt missile; and what will be the cost of equipping British bombers with the missile.

Mr. Wall: asked the Minister of Defence if he will make a statement about his recent visit to the United States of America.

Mr. de Freitas: asked the Minister of Defence if he will now describe in detail the arrangements he has made for the supply of United States-built Skybolts to the Royal Air Force.

Mr. W. Hamilton: asked the Minister of Defence if he will make a statement on the details of the agreement with the Douglas Aircraft Corporation for the purchase of United States Skybolt ballistic missiles.

Mr. Shinwell: asked the Minister of Defence what is the nature of the agreement reached with the United States


Government on the purchase of the Sky-bolt; what is the estimated cost; and when the weapons are likely to be delivered.

Mr. Grimond: asked the Minister of Defence how much Skybolt is going to cost.

Mr. Wyatt: asked the Minister of Defence whether he will make a statement on the details of the agreement reached for the supply of Skybolt to the British forces.

Mr. G. Brown: asked the Minister of Defence (1) what arrangements and commitments he has made in connection with the United States Sky-bolt missile and the Polaris missile; and if he will make a statement;
(2) whether he will make a statement on his recent visit to the United States of America.

Mr. Watkinson: My recent visit to North America provided the occasion for a valuable exchange of views and information with my Canadian and American colleagues; I cannot speek too warmly of the great cordiality with which I was received, and of the complete frankness of our discussions. I was also able, following the Prime Minister's understanding with the President, to clear the way for the technical experts to get down to the details over Skybolt. The United States Secretary of Defence and I agreed that if the Skybolt missile is successfully developed, and is compatible with the Mk. 2 V-bombers, Her Majesty's Government will place an order with the United States Government for a number of missiles and their associated equipment. Discussions will start as soon as possible to settle the financial and technical arrangements for cooperation.
Skybolt is a new and very advanced weapon system, but if our forces are to be armed with up-to-date weapons, we must decide in favour of projects that are at a relatively early stage in their development. In the case of Skybolt, my belief in this means of maintaining the deterrent is much reinforced by what I saw during my visit and by the first technical assessment of the project by British experts. Another important consideration is that fact that the techniques necessary to develop Skybolt have

already been proven in the course of the development of other missiles such as Snark, Hound Dog and Bold Orion.
As to the cost, the cost of the main development of Skybolt is being borne by the United States Government. The development costs which we shall have to bear with regard to modifying V-bombers and our share of the development of the missile will be relatively small. The warheads will be British made, and the cost of the actual missile cannot be firm until it is ready for production and a price negotiated.

Mr. Warbey: Can the right hon. Gentleman say what guarantee he can give that the money and research work put into it by this country will not be wasted through the eventual scrapping of this weapon, as, for example, the Bomarc missile has been scrapped? Would it not be far better if the Government were to give up this costly and vainglorious attempt to achieve peace through the H-bomb?

Mr. Watkinson: I shall not follow the hon. Member in the latter part of that supplementary question. His statement about Bomarc is, I understand from the Press, incorrect. We are in partnership with the Americans on this weapon and we shall be a party to all the decisions taken.

Mr. Wall: While congratulating my right hon. Friend on these arrangements for Skybolt, may I ask if he also studied development of Polaris while in America? Are we being kept fully informed about the development of this weapon, which many people believe may form the best means, as well as the most economical, of using the deterrent in future years?

Mr. Watkinson: Yes. The Polaris programme, thanks to the close and cordial relations between the United States and United Kingdom Navies, has had our naval personnel integrated in it almost from its inception. We have, therefore, been fully informed about it. I also took the opportunity while in America of having a full briefing on this weapon system, and I found it very interesting.

Mr. de Freitas: Since Skybolt is being developed and produced by the United States under United States control, both


legally and physically, is it still described as part of the independent British nuclear deterrent?

Mr. Watkinson: The answer to that is that if the weapon is developed and we purchase it without strings, fit it with our own warheads and carry it in our own aircraft, then it is an independent deterrent.

Mr. Hamilton: Can the right hon. Gentleman be more specific about cost and say whether it was cost that put him on the side of Skybolt rather than of Polaris? Can he say how effective this weapon can be, in view of the fact that V-bombers and their bases are relatively static and that in four or five years' time they will be able to be pinpointed quite easily by Soviet missiles?

Mr. Watkinson: I do not accept the latter part of the hon. Member's supplementary question. The V-bombers are an extremely mobile form of carrier for a missile. The plans we would make for dispersal are such that no aggressor could ever be sure that some at least of these aircraft had not survived his aggression and would thus be able to retaliate.

Mr. Shinwell: Is the right hon. Gentleman aware that he has made a very vague and nebulous statement? If he claims in reply to his hon. Friend the Member for Haltemprice (Mr. Wall) that he has made a firm agreement with the United States, would he be good enough to put it in writing and include it in the OFFICIAL REPORT SO that we can know what it was? Does he realise that all these ifs and buts about Skybolt's development and cost, in particular whether it could be adapted to V-bombers, are very unsatisfactory? We do not know where we stand.

Mr. Watkinson: It is the right hon. Gentleman who says that there has been an agreement. I was careful to say that what I had done was to prepare the way for a technical understanding which would lead to our partnership in the production of this missile. As to the question of its fitting the V-bombers, it is quite certain that it was designed to fit Vulcan bombers as well as the B 52, so there is no question about that.

Mr. G. Brown: As the right hon. Gentleman knows, by the accident of

time I happened to follow him around. Will he assure the House: (a) that there is no such thing as an existing missile called Skybolt; (b) that he has certainly made some tentative arrangements to be associated with some developments, some research work, which he hopes will lead to a missile called Skybolt; and (c) will he tell us how much he has committed Her Majesty's Government to contribute to those developments towards a missile which may never arrive?

Mr. Watkinson: I hope the right hon. Gentleman enjoyed his visit as much as I did. I do not know whether he followed me around to the Douglas Company at Los Angeles. If he did, he will realise as clearly as I do that his statement about the state of the Skybolt weapon system is not strictly correct. As to the second and important part of his question, there is no intention of committing the British Government to large expenditure on this missile until we see whether it is a viable and suitable weapon system or not, for the very reason I gave in my original Answer, that the American Government are bearing the total cost of research and development.

Mr. Brown: Two points arise. If I am wrong in saying that it does not exist—and the Minister says only that strictly speaking I am wrong—will he say at what stage the missile is? Is there such a thing? Secondly, when he says that we are not bearing large costs, will he say what costs we are bearing so that we can judge whether they are large or small?

Mr. Watkinson: If the right hon. Gentleman likes to put down a Question—[HON. MEMBERS: "NO."] The right hon. Gentleman has put down two Questions which ask me to make a full statement about my American visit. What I have said is that the British Government are committed only to small development costs.

Mr. Brown: How much?

Mr. Watkinson: I am not in a position to say how much until they have been properly costed. I would only be misleading the right hon. Gentleman and the House if I made a guess at it as this stage. These are all matters which have to be properly


worked out and considered, and it would not be right to give the House the details until I am in a position to give them accurately.

Mr. Brown: I have put down Question No. 25, which reads:
what arrangements and commitments he has made…
The Minister began by assuring us that he had not made any commitments. He now says that he cannot tell us what commitments he made. He made commitments. He entered into arrangements. Why should the House and the British public be denied the knowledge? [HON. MEMBERS: "He is not forced to tell us."] The public should know that he is refusing to tell us. Let that be clear.

Mr. Speaker: Order. We have a lot to get through. I hope we can avoid counter-statements and confine ourselves to questions.

Mr. Brown: May I not press the point? The Minister chose to say, first, that we had not entered into commitments for expenditure. Then he said that they were not large commitments. Now, when I ask how much he has entered into spending, he says that it is a small amount. When we ask how much is small, he says that he cannot tell us because he does not know. With your permission, Mr. Speaker, may I not—[Interruption.] Hon. Members should know by now that that never succeeds. May I ask the Minister, in pursuance of his duty to the House and the duty of the House to the country, to tell us what commitments he made? How much per year does he intend to spend on this missile which does not exist? What commitments did he make? He knows them and I know them. Now let him tell the House.

Mr. Watkinson: I think it is highly improbable that the right hon. Gentleman knows them. However, I want to clear his mind of confusion on defence matters as far as I can. He is confusing two issues. First, we are not making any contribution at the moment to any American spending on this missile. Let that be quite plain.
Secondly, we have, of course, to consider—I want to be as helpful as I can to the House—the money we shall have to spend on adapting the Vulcan bomber

to carrying the missile, to adapting the computing and calculating equipment in the bomber to guide the missile. We shall have to consider the cost of making the British warhead for the missile. Those are costs which are under our control.
I am perfectly prepared as soon as possible to give the House as much information as I think I should in the public interest. They are matters which we now have to work out. The British experts I was able to take with me have now been able to get a much more precise idea of what we ourselves will have to do.

Mr. Wyatt: Is the right hon. Gentleman aware that many of the Government's own advisers think that Skybolt is every bit as vulnerable as Blue Streak and that it is quite useless to proceed with it? Does he think his information on this point any better than it was on Blue Streak or on Blue Steel, which he said on 27th April was now being fitted when in fact it will not be ready for some time?

Mr. Watkinson: The hon. Gentleman got an answer about Blue Steel from my right hon. Friend, with which I entirely agree. The arguments between Blue Streak and Skybolt were fully dealt with in a long debate in the House. I have not altered my opinion that this is the best possible contribution we can make to the deterrent which is now available.

Mr. Grimond: Is it not extremely important that we should be quite clear about what the Minister has said? I understand that he has told the House that we have no guarantee that this weapon will be developed at all and no guarantee that it will be suitable for our bombers, if it is developed, and that we have no estimate of the cost. Can I now put the 64-dollar question? Is the right hon. Gentleman prepared to stake his reputation on the British Air Force ever being equipped with this weapon at all?

Mr. Watkinson: The hon. Gentleman is interpreting my words in a quite different sense. Many hundreds of millions of American dollars have already been spent in the development of this weapon, and, as I have said, the Americans are bearing the cost of development themselves. What we have now agreed in principle with the Americans is that we


will go into partnership with them on this weapon because of the close links between our own Bomber Command and Strategic Air Command, which is determined to have this weapon and believes that it is only this weapon which can maintain its efficiency after about 1964–65. That, in my view, is not only a proper arrangement to make, but one which will be to the advantage of this country.

Mr. Strachey: Will the right hon. Gentleman agree that, so far as the House can make out, what he has told us is that he has made an agreement to produce a weapon which does not exist at a cost which he cannot estimate?

Mr. Watkinson: I would not agree with that at all. What I would say is that I have been able to get a working arrangement of partnership with the Americans in what might be the most formidable deterrent yet invented by man.

Mr. Paget: There are three questions which I want to ask the right hon. Gentleman. Did he ask first for Polaris? Did the Americans tell him that he could not have Polaris and that it would be supplied only to N.A.T.O. and that it could he supplied only through N.A.T.O.? Was that because Polaris existed? Has this arrangement been made with the Americans simply because Skybolt does not exist, because it is not going to exist, and because the Americans have not the slightest intention in the world of giving us an independent deterrent?

Mr. Watkinson: The simple answer to all the hon. and learned Gentleman's question is "No."

Mr. S. Silverman: Would it be a fair summary—[HON. MEMBERS: "No."]—Like the right hon. Gentleman, I am trying to help. Would it be a fair summary of what the right hon. Gentleman has told the House to say that the result of his negotiations in the United States is that what he has really done is to buy a pig in a poke with a blank cheque?

Mr. Watkinson: Perhaps I may equally put my interpretation on what the hon. Member has said and say that his help ought perhaps to be addressed more to his own front bench than to me.

Mr. G. Brown: In view not only of the unsatisfactory but grossly misleading nature of the Minister's replies, may I make it plain—

Mr. Speaker: I am afraid there are various objections to what the right hon. Gentleman is saying. I have more than once asked that hon. Members should adhere to the traditional formula when wishing to raise matters on the Adjournment.

Mr. Brown: I was aware of that. Mr. Speaker, but I was not giving personal notice that I would raise the matter on the Adjournment. I was saying that, arising out of this series of Questions and answers, in view not only of the unsatisfactory nature of the Minister's replies—in the ordinary limited term which one uses when giving notice that one will raise the matter on the Adjournment—but the grossly misleading nature of those replies—in terms of the House as a whole—we, the Opposition, will seek occasion to debate this issue.

Mr. Watkinson: I shall be delighted, Mr. Speaker, and perhaps at the same time we shall be able to debate the Opposition's defence policy.

Mr. Farey Jones: On a point of order. In view of the numerous questions asked by hon. Members opposite and the fact that I had a particularly important question to ask the Defence Minister, may I now be allowed to ask that question?

Mr. Speaker: No. I have called Question No. 8.

Later—

Mr. G. Brown: May I have an answer to Question No. 26?

Mr. Speaker: I understood that the Minister answered Question No. 26 in that numerous group of Questions with which we were troubled.

Mr. Brown: Question No. 26 has nothing to do with Skybolt. I thought I heard the Minister mention Question No. 26, but I thought it must have been a misnomer. The Minister discussed many other Questions other than Skybolt, and it was the other Questions which I was giving him a chance to answer.

Mr. Watkinson: Perhaps the right hon. Gentleman did not hear the first part of my Answer in which I dealt with the matter.

Mr. Frank Allaun: asked the Minister of Defence to what extent, in deciding to buy Skybolt rockets for use from British-based aircraft, he took into account the resultant increased likelihood of the United Kingdom being destroyed by counter-attack whether they are used by design or accident.

Mr. Watkinson: The purpose of these weapons is to deter potential aggressors from resorting to war, and our possession of them will reduce the risk of war. The United Kingdom would not use these or any other weapons by accident.

Mr. Allaun: Is it not certain that if the Skybolt were ever used there would inevitably be immediate retaliation? If and when it is produced, would it not therefore be a suicide weapon?

Mr. Watkinson: The hon. Member's views and mine do not agree, but at least I am glad to hear that he accepts, as I do, that Skybolt is a very powerful weapon.

Mr. Swingler: asked the Minister of Defence if he will make a statement on the destructive power of the Skybolt ballistic missile, and the purposes for which he proposes to purchase it.

Mr. Watkinson: Skybolt missiles with British nuclear warheads will be carried in Mk. II V-bombers as a strategic deterrent. It would not be in the public interest to disclose the destructive power of the warheads.

Mr. Swingler: Is the Minister aware of the cynicism of the answers he is giving on this matter? Does not he bear a serious responsibility for having for years deluded the British public that he was developing a British deliverable nuclear missile, and is he now trying to delude the public into believing that he is buying an American deliverable nuclear missile which does not even exist?

Mr. Watkinson: That is not what the hon. Member asked. He seemed to be worried about the destructive power of this missile.

Mr. Shinwell: asked the Minister of Defence whether the North Atlantic Treaty Organisation has been consulted about the purchase of Skybolt; what communication has been made by the North Atlantic Treaty Organisation Council to Defence Ministers of other

allied countries; and what arrangements have been made by the North Atlantic Treaty Organisation to equip other member countries with these weapons.

Mr. Watkinson: It would not have been appropriate to consult N.A.T.O. about the purchase of Skybolt. This weapon is being acquired for the equipment of Vulcans and possibly Victors. None of this type of V-bomber, as the right hon. Gentleman knows, is assigned to N.A.T.O. As for the second and third parts of the Question, the proceedings of the North Atlantic Council are confidential.

Mr. Shinwell: Is not this what might be called unilateral action? Why do not we consult N.A.T.O. on matters of this sort? What is the use of talking about co-ordination unless we occasionally consult N.A.T.O.?

Mr. Watkinson: The answer is that some of the Valiant V-bombers are assigned to N.A.T.O., but they are not the bombers which will carry this missile. Therefore, it would not have been appropriate to consult N.A.T.O. about the purchase of this weapon.

Mr. Grimond: asked the Minister of Defence what parts of British industry and what research organisations, are to take part in the development of Skybolt.

Mr. Watkinson: The present intention is that Skybolt will be developed in the United States. British industry, assisted by Government research establishments, will undertake the modification of Mark II V-bombers and their missile equipment to enable them to carry Skybolt.

Mr. Grimond: Does that mean we shall have no say in the development of the actual programme and the question of whether it goes on or is stopped, but that we shall come into it only after the missile has been fully developed?

Mr. Watkinson: No, because as I said earlier it has been agreed that we do this together. Therefore, we shall be fully consulted about all policy decisions in the general progressing of the weapon.

Mr. Chetwynd: asked the Minister of Defence whether he will make a statement on the military future of the Vickers VC10 in relation to the use of Skybolt.

Mr. Watkinson: No decision has been taken to use the VC10 to carry Skybolt.

Mr. Chetwynd: In view of the limited range and the life of the V-bombers, which will end probably in 1965, is not it high time some arrangement was made if we are to have any use for these weapons at all?

Mr. Watkinson: I do not accept that the V-bombers have a limited life. The time scale we are considering with regard to the VC10 is the period from the mid-1960s until early in 1970, and the V-bombers are certainly capable of carrying out their task in that period.

Mr. Zilliacus: Is not part of the difficulty in this matter the fact that no one knows whether the next Administration will actually ratify the arrangements made by the present Administration in the United States? After the Presidential election, cannot the Administration legally change its mind about the whole or a part of any of these working arrangements?

Mr. Watkinson: There are always views about the degree to which one Administration can bind another. The American Strategic Air Command will remain, or at least I hope it will remain, and it is the American Strategic Air Command which wants this missile and is determined to have it, and we are in partnership with the Command in getting it.

Mr. Wyatt: Can the Minister say how long before 1965 the V-bombers will be equipped with Blue Steel, because he untruthfully told the House—

Mr. Speaker: Order. The hon. Member must reframe his question or withdraw that allegation.

Mr. Wyatt: Will not the Minister say how long—[HON. MEMBERS: "Withdraw."] I am trying to reframe the question. Can the Minister say how long before 1965 the V-bombers will be fitted with Blue Steel, because he misled the House on 27th April by informing us that the Blue Steel bomb was now being fitted, when in fact it will not be ready for some time, and this was part of the argument used when we were going to drop Blue Streak?

Mr. Watkinson: Perhaps the Opposition will feel better when they have given

birth to their new defence policy. This supplementary question has no relation to the Question on the Order Paper, but, as the hon. Gentleman has accused me of misleading the House, perhaps I may reply to him shortly. The answer is that I said in the defence debate that the Mark II V-bombers now coming into service were being fitted with Blue Steel flying bombs, and that is a true statement.

Amphibious Warfare (Ships and Craft)

Mr. Wall: asked the Minister of Defence what proposals he has for replacing obsolete amphibious warfare ships and craft.

Mr. Watkinson: I am not yet in a position to make a statement on this matter.

Mr. Wall: Does my right hon. Friend agree that there is a need for a modern assault ship to operate with the Commando carrier, and will he make a statement before the Summer Recess?

Mr. Watkinson: I hope to be able to make a statement before long, but I cannot guarantee that it will be before the Recess.

Recruits (Scottish Miners)

Mr. Hamilton: asked the Minister of Defence how many men between 18 and 30 years of age, previously employed as miners in Scotland, have joined the Armed Forces in each of the last three years, and in the first five months of 1960; and what proportion the Scottish figure represents of the total recruitment from the mines for Great Britain as a whole.

Mr. Watkinson: The only figures readily available in respect of the first part of the Question are those given in reply to the hon. Member for Chester-le-Street (Mr. Pentland) on 11th May. They relate to enlistments of men from the coalmining industry as a whole between the ages of 18 and 25 up to 31st March, 1960, only. On this basis recruitment from the Scottish division represents 16·3 per cent., 14·7 per cent., 20·8 per cent. and 26·3 per cent., respectively, of total recruitment in each of the four periods concerned.

Mr. Hamilton: Does not the right hon. Gentleman agree that this is an unduly high proportion of recruits from Scotland—largely because of unemployment there? If, as the Government hope, their unemployment policy is to succeed, will not these recruitment figures fall even further, so that the right hon. Gentleman will be in further difficulties with his recruiting policy? Although we all hope that unemployment will decline, what steps will the Minister take in that event to step up his recruiting?

Mr. Watkinson: I do not agree that this is an unduly high proportion, but I think that the hon. Member would agree at least that these very fine men are very welcome in Her Majesty's Forces and will be a very great addition to them.

Bombers (Patrol Flights)

Mr. Frank Allaun: asked the Minister of Defence if he will make a statement on his recent discussions with Mr. Gates on a worldwide 24-hours-aday joint patrol by United States and United Kingdom aircraft carrying hydrogen bombs.

Mr. Swingler: asked the Minister of Defence, in view of the dangers arising from accidents or miscalculations, if he will reconsider the policy of Her Majesty's Government regarding participation in round-the-world hydrogen-bomb-carrying patrol flights.

Mr. Watkinson: I do not contemplate any change in the present policy for the British bomber force. Flexibility and dispersal are, of course, very important and the pattern of disposition of the force is, therefore, variable. It would not be in the public interest to explain exactly what our arrangements are, but some of the suggestions in the hon. Members' Questions are wide of the mark.

Mr. Allaun: If the Minister's object is dispersal and flexibility, what is the value of his plan if these aircraft do not frequently carry the hydrogen bomb? Will he give the House an undertaking that this will not be done either by British or American aircraft, in view of the enormously increased danger of an irretrievable mistake being made through the misinterpretation of a signal or a situation?

Mr. Watkinson: The question of the carriage of British nuclear weapons in British bombers has been clearly explained to this House several times before by my right hon. Friend the Prime Minister and my right hon. Friend the Home Secretary, and I have nothing to add to what they said. I want to make it plain that I did not discuss with Mr. Gates the question of a "round-the-world alert", as I have seen stated in some quarters. What we are undertaking is a steady development of the policy of the random movement of bombers, thus making them more invulnerable to surprise attack.

Mr. Swingler: Is the Minister's reply intended to be a categorical repudiation of the report which appeared in the Press—which, according to him, was wrongly attributed to the United States Defence Department—that there was an Anglo-American "round-the-world" nuclear bomb-carrying patrol flight developing? Is his answer a repudiation of that statement, or is he suggesting that this is being developed?

Mr. Watkinson: I do not wish to add anything to what I have said. I think it is quite clear.

Mr. Mendelson: As the right hon. Gentleman has told the House that he does not wish to change the arrangements previously agreed to, does it mean that Her Majesty's Government will not allow any other forces to have an alert involving Britain without prior knowledge and approval by the British Government?

Mr. Watkinson: That is quite a different question.

Chief of Defence Staff (African Visit)

Mr. Callaghan: asked the Minister of Defence what visits to Africa, and for what purpose, the Chief of the Defence Staff proposes to make this year.

Mr. Watkinson: Lord Mountbatten will be visiting British units in East Africa and the Federation of Rhodesia and Nyasaland towards the end of September this year to discuss local military problems with Commanders on the spot.

Mr. Callaghan: Can we take it that there is no intention of entering into defence discussions about new bases?

Mr. Watkinson: Yes, I think that is perfectly correct. Lord Mountbatten's visit, as the hon. Gentleman knows, is to see our forces dispersed in Kenya and their accommodation and the things which generally the Chief of the Defence Staff inspects.

Mr. Callaghan: Will the Minister convey to the Chief of the Defence Staff what he may already know, that in view of our experience in other parts of the world, if we are to have a long-term defence arrangement in Africa which is of any value to Britain, we must carry African opinion with us in the arrangements which are made?

Mr. Watkinson: I agree with the hon. Gentleman. I think that the Nigerian Defence Agreement, which is in course of production, shows clearly that that is our wish.

Mr. Wigg: Can the House take it that the right hon. Gentleman's statement that the visit is not concerned with new bases now excludes the proposal that British troops should be sent to the Cameroons in the near future? Is he aware that it is nearly 100 years since British infantry of the line were required to serve in West Africa, and does this now exclude that proposal?

Mr. Watkinson: I was dealing with the question of the visit by Lord Mountbatten to our forces and base installations in Africa. I have said that is the main purpose of his visit. I do not wish to add anything to my Answer.

Kenya (Base)

Mr. Stonehouse: asked the Minister of Defence what plans he has for the establishment of a long-term base in Kenya.

Mr. Watkinson: We plan to station in Kenya the main elements of an infantry brigade group together with supporting R.A.F. personnel.

Mr. Stonehouse: Do we understand from the answer given to a supplementary question to Question No. 19 that there is no question of the bases in Kenya being developed unless with the full support of the people of Kenya?

Mr. Watkinson: As I think the hon. Gentleman knows, a great deal of building is going on at the moment for British

forces in Kenya in order to give them proper living standards for that kind of job. That is perfectly right. There is no conflict, as I myself found recently when I was in Kenya, between what we are doing and local opinion.

Mr. Callaghan: Will the Minister bear in mind before any money is wasted that the balance of power in Kenya may well change further and, before we spend too much money, it is vitally important that he should have an assurance from those in the Government who will be in power that they support the defence arrangements?

Mr. Watkinson: I accept that we should be most unwise—indeed, it would not be right—to show by our actions in building bases that we thought we had the right to be there for ever and a day. We are not doing that.

Mr. Wall: Is there any evidence to show that the people of the three races in Kenya would not wish to make their contribution to Commonwealth defence?

Mr. Watkinson: As I said, I found in Kenya not long ago no objection to what we are doing, which is of great economic advantage to Kenya.

Reserve Forces Acts

Mr. Wigg: asked the Minister of Defence when Her Majesty's Government intend to introduce legislation revising the Reserve Forces Acts; and whether he will make a statement.

Mr. Watkinson: No changes in Reserve Force Legislation are intended in this Session.

Mr. Wigg: My Question to the right hon. Gentleman related to legislation not necessarily in this Session but in any Session. The most recently joined hon. Member of this House would know that it is not possible to do it in this Session. I am asking what proposals the Government have under consideration to cover this and the next Session.

Mr. Watkinson: It is not customary to disclose the business for the next Session.

Mr. Wigg: Does the right hon. Gentleman read the defence debates? According to the report of the defence debate,


the Under-Secretary of State was kind enough to say that this matter was under consideration. Has there been a change of policy, or is it in fact the case that the Government have something to hide?

Mr. Watkinson: I am not saying this is not under consideration. I am only saying that at present the Government are not in a position to make any statement.

Oral Answers to Questions — PORTUGAL (DR. JAMES RUSSELL)

Mr. Brockway: asked the Secretary of State for Foreign Affairs what representations he has made to the Government of Portugal regarding the expulsion from Angola of the Reverend James Russell, a British subject from Dundee, secretary of the Evangelical Alliance of Angola, after 27 years' service as a missionary.

The Joint Under-Secretary of State for Foreign Affairs (Mr. Robert Allan): None, Sir. No expulsion order has been issued. Dr. Russell left Angola for discussions in Lisbon, and is at present on leave in the United Kingdom. I understand that he has not so far sought to re-enter Angola.

Mr. Brockway: While thanking the hon. Gentleman for that information, which is not according to the information I have received, may I ask whether it is not a fact that Mr. Russell left Angola because of protests at the action he was taking there on behalf of the African population?

Mr. Allan: I understand that Dr. Russell left Angola at the request of the Minister for Overseas Territories in Lisbon and was going to have discussions with him there.

Oral Answers to Questions — CYPRUS

Mr. Healey: asked the Secretary of State for Foreign Affairs if he will make a further statement on the Cyprus negotiations.

Mr. Donnelly: asked the Secretary of State for Foreign Affairs if he will make a statement on the Cyprus negotiations.

Mr. Driberg: asked the Secretary of State for Foreign Affairs what progress has now been made towards agreement on the independence of Cyprus; and if he will make a statement.

The Minister of State for Foreign Affairs (Mr. John Profumo): Since the statement by my right hon. Friend the Colonial Secretary on 2nd June, the efforts to devise a formula on the future of the Sovereign Areas, should we ever decide to leave them, have continued in conjunction with the Greek and Turkish Governments. As a result of these efforts, I believe that a formula which could form part of a general agreement on the outstanding points may shortly be forthcoming.

Mr. Healey: Is the Minister of State aware that we on this side of the House find it very difficult to support, indeed, to understand, the Government's position on the future of these bases? Can he tell us whether it is true, as stated in the Press, that unless agreement is reached by Friday there will be no chance of enacting the necessary legislation to give Cyprus independence before the Summer Recess? If so, can he give an undertaking to the House that the Government will make a full statement on the negotiations before the beginning of next week?

Mr. Profumo: Since the Opposition, I understand, has formally said that it will give facilities to the Bill when we put it before the House, I should not like to say exactly what the last possible date is. I think it would be difficult if we were tied within the range of particular dates. I am hopeful that the negotiations may now be nearing an end; in fact, Archbishop Makarios is reported as saying that this would be a decisive week.

Mr. Donnelly: Can the right hon. Gentleman say why, if the Bill is acceptable to us on this side of the House, it cannot be dealt with in a single day?

Mr. Profumo: Of course, it would have to be acceptable to my hon. and right hon. Friends as well.

Mr. Driberg: Can the right hon. Gentleman say what real issue is still at stake, in the view of the Government? Is it really necessary to hold


up this very important agreement merely because the Government will not say that if in fifty years' time we decided to clear oat of these bases, they would go to the Republic of Cyprus? What is the difficulty?

Mr. Profumo: It is not quite as simple as the hon. Member puts it. It is not quite like putting the last pieces of a jigsaw puzzle into place. The final stages of any negotiations are usually, perhaps, the most difficult. This is a very complex negotiation which involves no fewer than five parties, and we have to find solutions which are acceptable to them all on all points.

Mr. Driberg: But is either Greece or Turkey opposed to the suggestion that the bases should go to the Republic of Cyprus if we in fact vacate them?

Mr. Profumo: I hope the hon. Member will agree with the last part of my last answer.

Mr. Thorpe: Is it not a fact that no such formula has been put to the Archbishop yet and there is no indication, even at this stage, as to the British Government's intention in regard to any formula?

Mr. Profumo: I wonder if the House would appreciate that I am at some disadvantage in trying to reply to these questions? Short of revealing the details of the exact position, I cannot reply to the questions, and if I did reveal the exact position, I might well prejudice the outcome of the negotiations.

Sir C. Mott-Radclyffe: Will my right hon. Friend agree that the real issue is whether or not Archbishop Makarios has any intention of implementing the terms of the London Agreement?

Mr. Profumo: I know what my hon. Friend means, but I have reason to believe that the Archbishop is seriously wishing now to conclude an agreement. There are some outstanding points on which I hope the House will not press me more, but we may be able to reach some finality in the not-too-distant future.

Oral Answers to Questions — DIPLOMATIC NOTES (SOVIET UNION)

Mr. Harold Davies: asked the Secretary of State for Foreign Affairs to what extent it is the policy of Her Majesty's Government to allow diplo-

matic Notes by this country to the Union of Soviet Socialist Republics to be examined and discussed in the Permanent Council of the North Atlantic Treaty Organisation before transmission to the Union of Soviet Socialist Republics.

Mr. Profumo: There is no set practice, but it is Her Majesty's Government's policy to consult their North Atlantic Treaty Organisation allies on all matters affecting the Alliance.

Mr. Davies: Is the Minister aware that once again his Answer appears not to agree with the statement of M. Henri Spaak, Secretary of N.A.T.O., who said in the North Atlantic Treaty Organisation that all the Notes exchanged between the Soviet Union and members of the N.A.T.O. organisation first went through the permanent Council of N.A.T.O. for consideration? Does that not mean that the sovereignty of this Parliament is very much limited and it is thus not enabled to have a clear policy vis-à-vis the Soviet Union even on the Summit talks?

Mr. Profumo: I can only reassure the hon. Member by saying that the lines of Notes to the Soviet Government have sometimes been discussed in N.A.T.O. where they have touched the interests of the Alliance as a whole, but procedure in the Council is, of course, confidential and I am not prepared to say what has passed in any specific cases. If the hon. Member looks up the debate we had just before the Recess, he will see that it was the general agreement of both sides of the House that we should consult even more closely with our N.A.T.O. allies.

Oral Answers to Questions — DISARMAMENT

Mr. Harold Davies: asked the Secretary of State for Foreign Affairs in view of the Soviet refusal to accept the United States' open skies plan, now being discussed at the Ten-Power Conference on Disarmament at Geneva, on the ground that such a plan would lead to aerial surveys of Soviet territory, whether he will now make it clear that Great Britain will not now support the plan.

Mr. Profumo: No details of a new United States "open skies" plan have been published. It would, therefore, be


premature for Her Majesty's Government to express an opinion about it. The plan is not being discussed at the Ten-Power Conference in Geneva.

Mr. Davies: While thanking the right hon. Gentleman for that Answer, may I ask if he is aware that the majority of people in this country, irrespective of the political party they support, are afraid of this policy of a mass of bases all over Europe and would protest most certainly if Britain were used for bases for an open skies plan which might deteriorate into further U2 espionage flights? Will the right hon. Gentleman assure the people of Britain that no bases in Britain will be used for such purposes, whatever may result from this discussion of an open skies policy?

Mr. Profumo: That is a very much wider question. While not wanting to be involved in it, I think the hon. Member should put down that question to the Minister of Defence. I have tried to answer about the open skies plan. Aerial surveys as such form part of the disarmament plans put forward even by the Soviet Union, although in that case they come in the last stage.

Oral Answers to Questions — POLAND (FRONTIER WITH GERMANY)

Mr. Zilliacus: asked the Secretary of State for Foreign Affairs whether, in view of the breakdown of the Summit Conference, he will now take the initiative in seeking agreement on specific issues, such as the recognition of Poland's frontier with Germany.

Mr, R. Allan: My right hon. Friend the Prime Minister and my right hon. and learned Friend the Foreign Secretary made it clear during the Foreign Affairs debate on 30th May that we have every intention of continuing to seek agreement with the Soviet Government on specific issues. But they do not consider that the final delimitation of Poland's frontier with Germany in anticipation of a peace treaty can be one of these. On this question the attitude of Her Majesty's Government remains as stated in reply to the Question by the hon. Gentleman on 11th November last.

Mr. Zilliacus: Is it not a fact that Western Poland has been settled by the Poles and the Germans driven out with

the consent of the allies, that this area has become an integral part of the economy of Poland in which the country has invested great sums without which it cannot live and President de Gaulle, as well as the Soviet Government, have made clear their view that this frontier should be recognised? May I infer from the statement of the hon. Gentleman that, whereas the question of demarcation obviously remains open, the frontier itself is regarded for all practical purposes as unchangeable today?

Mr. Allan: I cannot add to the Answer which was given on 11th November, which was that the final delimitation of the frontier between Germany and Poland cannot be formalised until there is a peace settlement. As to the other points raised by the hon. Member, there can be no legal or binding force in any ex-parte statements on this subject in advance of a peace treaty.

Mr. C. Osborne: Will my hon. Friend consider giving the old-fashioned secret diplomacy a chance to do the work in these negotiations rather than over-publicised Summit negotiations which fail so miserably?

Mr. Allan: That was certainly in the mind of my right hon. Friend the Prime Minister when he made his speech in the foreign affairs debate.

S. G. BROWN, LTD. (SALE)

The following Questions stood upon the Order Paper:

Mr. FAREY-JONES: To ask the Civil Lord of the Admiralty whether he will make a statement on the future employment prospects in the firm of S. G. Brown, Limited.

Mr. LEE: To ask the Civil Lord of the Admiralty whether he will make a statement on the sale of S. G. Brown, Limited.

The Civil Lord to the Admiralty (Mr. C. Ian Orr-Ewing): With permission I will now answer Questions Nos. 56 and 57.
In accordance with the decision announced in the House on 8th June, 1959, the Admiralty has agreed to sell S. G. Brown Ltd. on 30th June.
We received a number of offers for the company. We decided that the offer made by de Havilland Holdings Ltd. most satisfactorily meets the considerations attached to the sale which were stated to the House in last year's debate. De Havilland Holdings Ltd., a member of the Hawker Siddeley Group, are for this purpose associated with American Bosch Arma Corporation. De Havilland Holdings will retain the controlling interest.
The Admiralty has obtained from de Havilland Holdings Ltd. assurances of their confidence in maintaining the existing level of employment of skilled personnel at S. G. Brown Ltd. and of their intention to seek a basis for expanding the company's activities. The Admiralty believes that this arrangement provides the best prospect of developing this company.

Mr. Lee: Is the hon. Member aware that there was never any question of problems about employment at S. G. Brown Ltd. until the Government began their interference with its very successful career? Have there been a number of applications from British firms for the whole of the holding in S. G. Brown? For our part, we thoroughly disagree with the view that there is need to interfere in this nationalised business. But if there have been offers from a large number of British firms, why have they been turned down and preference given to a company which includes the Bosch Arma Corporation of the United States? What is the selling price which the Government have obtained? What apportionment of the shares is to be given to the de Havilland Company and the Bosch Arma Corporation?

Mr. Orr-Ewing: We received offers from other British companies, but this was the best offer which we received. It is not unusual to be associated with a licensing agreement with another company, in this case an American company. This licensing agreement had already been in force since 1957, and it is quite understandable that it should continue if the company were to continue the manufacture of the same products. It is not usual in negotiations of this sort to give the price, and I do not want to give one at the moment. As for the apportionment of shares, the de Havilland Company will

retain a 51 per cent. controlling interest in this company.

Mr. J. Griffiths: On a point of order. The Minister said that he does not propose to give the price. This is the House of Commons and we are responsible for public money and public property. May I ask you, Mr. Speaker, therefore, whether the House has not a right to know from the Government at what price public property, for which we are responsible, has been sold?

Mr. Speaker: The right hon. Gentleman knows very well that it is not a matter for me. I cannot require the Minister to answer something if he does not wish to answer.

Mr. Orr-Ewing: These dealings are confidential. That is why I do not desire to give the price at this juncture. But if there are strong feelings—and I agree that there is a special case—I will approach the buyers of this company to see whether they have any objection to the price being given. [HON. MEMBERS: "Oh."] When you undertake confidential negotiations it is normal to consult the other member as to whether you can reveal the price. I will certainly approach them and see whether this price can be revealed. I would add that it is not only the price which we should reveal, but also the liabilities, including a very large bank overdraft.

Mr. J. Griffiths: I should like to ask the Leader of the House to answer this question, as protector of the rights of the House. When public property is disposed of—and we may have other examples, such as Richard Thomas and Baldwins, in the near future—this House is entitled to know the price, whether the other parties consent or otherwise. Will the Leader of the House deal with that question?

The Secretary of State for the Home Department (Mr. R. A. Butler): If my hon. Friend, in his answer, had said, "It is quite impossible under any circumstances to give the price," I should understand the right hon. Gentleman's indignation, but what my hon. Friend said is that he will approach the parties concerned, obtain the correct figure and give it to the House. I think that to get an exact answer it would be advisable


to give my hon. Friend the time to do this and then to give a proper answer to the House.

Mr. Gordon Walker: Is not the right hon. Gentleman saying that a private concern is to be given a veto over whether the House of Commons should have this information?

Mr. Butler: No, Sir. I am glad that the right hon. Gentleman raised the point with that inflexion. That is not what was in my mind. What was in my mind was that my hon. Friend should give the answer, which he has undertaken to give. I will give an undertaking on his behalf and on behalf of the Government that that answer will be given.

Mr. Farey-Jones: Mr. Speaker, since Question No. 56 was down in my name, I cannot understand why further supplementary questions were asked by a number of hon. Members opposite before I was given the usual opportunity to ask a supplementary question.

Mr. Speaker: I am sure that the hon. Member will understand my difficulty. One question was asked by a member of the Opposition, who had put down one of these two Questions, and there then arose not a supplementary question, but a point of order. That was the difficulty.

Mr. Farey-Jones: In view of the questions and replies, may I ask my hon. Friend whether he will make this point clear to the House: that the fact that the de Havilland Company, an excellent company, retains control, and that the agreement is with the Bosch Arma Company, with its fantastic technical contribution to this problem, represents an agreement likely to be very conducive to the prosperity and the excellent future of this company, and that if this precedent is followed, both in defence and other industries, it could be a very remarkable thing for this country?

Mr. Orr-Ewing: I thoroughly endorse the remarks of my hon. Friend the Member for Watford (Mr. Farey-Jones), who represents the 1,000 employees in this company.

Mr. Lee: Does the Minister agree that the logic of that statement is that we should sell out about two-thirds of British industry to the United States?
May I return to the need for the publication of the price? The Minister agreed that a large number of British firms tendered. The only thing that we have heard is that the Government have accepted the best offer. It is important, in the interests of all concerned, that the firms which tendered shall know that the tender which has been accepted is a better offer than those which they submitted.
Is it not also the case that it is almost treachery to the British nation to sell out a first-class business of this sort to any sort of foreign capital—and I am not being anti-American about this—when we have the complete "know-how" and have produced a fine gyro compass which is equal to anything in the world? It is selling the employees down the drain.

Mr. Orr-Ewing: That is not the opinion of the people who have bought this company, nor is it the opinion of informed hon. Members in the House. Many British companies have very greatly benefited from licensing agreements and technical "know-how" derived from other overseas companies. Perhaps I may point out to the hon. Member that Vauxhall Motors and Standard Telephones and Cables are both American-owned companies, but they are still extremely efficient and I should have thought that their employees were among the best-paid in this country.

Mr. Lee: They were not publicly owned.

Mr. Nabarro: Will my right hon. Friend respond to two further points? If, in due course, he publishes the purchase price paid by this consortium, will he also publish with it the audited reports and accounts of this company since it was expropriated in 1942, so that the whole House may then judge whether the Government have received the proper price for the assets?
Secondly, will he bear in mind that the entire Conservative Party, which has a majority in the House, warmly endorses the decision that he has announced today?

Mr. Orr-Ewing: I think that what the House would like is an early notification of the price received. As I said earlier, it is only fair that one should also see what the liabilities are, including the


very large bank overdraft. I have to clear this with the bank and with the purchasers, because the negotiations were confidential. That is why I asked permission to do that before publishing the price. I do not know at this moment the figures of the overdraft and liabilities. I should like to clear that. The House debated this very thoroughly last June. It is significant that my hon. Friend the Member for Watford (Mr. Farey-Jones) who represents this company doubled his majority at the General Election.

Mr. Shinwell: Am I right in saying that the primary determination in this transaction was not so much the price? That presents a difficulty to the Civil Lord and will subsequently present a difficulty in order to ascertain whether the highest tender was accepted. Was not the primary determination to bring an American company into this affair? Was not that the sole consideration?

Mr. Orr-Ewing: No. Our desire was to dispose of this company, which needed further taxpayers' capital if we were to carry it on in Admiralty ownership and, at the same time, produce increased technical "know-how" by an agreement of this sort. The Bosch Arma Corporation has already had a limited licensing agreement with S. G. Brown Ltd. for the previous three years. Therefore, the object was not to get that Corporation involved, but it was helpful that it was involved and could thus carry on with the "know-how" which had been built up in recent years.

Mr. John Morris: Is there any prohibition against the control of this company passing to American or foreign hands in the future?

Mr. Orr-Ewing: The hon. Gentleman has asked a very good question. I thought that it would probably be asked. De Havilland Holdings Ltd. will retain a controlling interest in S. G. Brown Ltd., and special safeguards have been agreed with the purchasers to ensure continuance of British control. These will take the form of a special clause in the articles of association providing against the transfer of more than 49 per cent. of the share capital to foreign interests. This article, in turn, will be protected by an undertaking on the part of the purchasers not to alter it without the consent of Her Majesty's Government.

Mr. C. Osborne: Is my hon. Friend certain that the workers in this firm will be treated as well as the average workers in Anglo-American companies in this country, who have done extraordinarily well and are, on the whole, better treated and higher paid than people employed by British firms?

Mr. Lee: Will not the Civil Lord agree that we are reaching a rather fantastic situation when the hon. Member for Kidderminster (Mr. Nabarro) pledges the whole Tory Party as being behind a sale of British assets to a foreign country, while the hon. Member for Louth (Mr. C. Osborne) tells us that good conditions cannot be obtained in Britain unless foreigners are persuaded to come here?

Orders of the Day — FINANCE BILL

Considered in Committee [Progress, 21st June].

[Mr. JOHN ARBUTHNOT in the Chair]

New Clause.—(EXTENSION OF RELIEF UNDER S. 9 OF FINANCE ACT, 1956.)

(1) Subsections (1) and (2) of section nine of the Finance Act, 1956 (which provide relief from income tax on certain savings bank interest) shall, subject to the provisions of the next following subsection, apply in respect of dividends on shares of a society registered under the Industrial and Provident Societies Acts, 1893 to 1954, or under the Industrial and Provident Societies Acts (Northern Ireland), 1893 to 1955, and in respect of interest on deposits with such a society or with a registered friendly society, as they apply in respect of interest on deposits with the Post Office savings bank.

(2) Where by virtue of the last foregoing subsection the amount of surtax payable by an individual would exceed the sum of—
(a) the amount of surtax which would have been payable by him, if that subsection had not been passed, and
(b) the amount of relief, if any, to which he is entitled by virtue of that subsection,
that excess shall be disregarded for all the purposes of the Income Tax Acts.—[Mr. Sydney Irving.]

Brought up, and read the First time.

3.45 p.m.

Mr. Sydney Irving: I beg to move, That the Clause be read a Second time.

The Temporary Chairman: It will be for the convenience of the Committee to discuss with this new Clause the new Clause in the name of the hon. Member for Twickenham (Mr. Gresham Cooke) and other hon. Members—Relief from Income Tax on investment income.

Mr. Irving: The purpose of the Clause is to extend the Income Tax concession given in 1956 to certain Savings Bank interest to interest on Co-operative shares and Penny Bank accounts. It is not proposed to ask that the concession should be extended to Co-operative loan capital, because there is a statutory limit on Co-operative shares of £500 and of £50 in Penny Bank accounts. There is none on loan capital, and for this reason no special treatment is asked for.
At the moment, the first £15 of interest on savings in the Post Office Savings Bank and in the ordinary departments of Trustee Savings banks is exempted from tax. It is specifically provided for this purpose that a man and wife should be treated separately. Therefore, it is possible for a married couple to hold £1,200 without paying Income Tax on interest.
At the end of 1958 savings in the Co-operative movement amounted to £301 million. This included £251 million in share capital. But these savings, although large in total, are, in effect, the small savings of 12½ million members of the Co-operative movement with an average shareholding of £20.
Both the present Chancellor of the Exchequer and his predecessor, in 1956, were and are anxious to encourage small savings, but this discrimination against Co-operative investment in the matter of Income Tax concessions not only places a handicap on the Co-operative movement, but—which is worse—it may well cause a transfer of past savings to savings banks. We believe that this is not what either the Chancellor or his predecessor intended.
The present system is unjust, because it discriminates against certain types of small savings. There is already a further discrimination against Co-operative members, in that when a person applies for a supplementary old-age pension, or for National Assistance, only the first £125 of Co-operative investment is counted as an exemption for assessment of means, whereas for investment in the Post Office and in Trustee Savings banks this sum is £375.
The Bill raises the limit of holdings of the Tenth Issue of National Savings certificates from £750 to £900, from 1,000 units to 1,200 units. It was pointed out that, in addition to these holdings, a person may have as much as £2,175 in earlier issues of National Savings certificates. This form of investment is tax free.
An interesting analysis was made for the Radcliffe Committee. It showed that there were 10 million live holdings in National Savings certificates in 1957 and that the average holding was £189, but 42 per cent. of the total amount was in holdings of more than 1,000 units. National Savings certificates, if held for


the whole period of seven years, have a yield of roughly 4½ per cent. tax-free. If they are held by people paying the standard rate of tax, this is the equivalent to a true cost to the Government of 6⅞ per cent. and for people paying Surtax the yield is equivalent to 37·3 per cent.

Mr. Gerald Nabarro: What rate of Surtax?

Mr. Irving: That is the top rate.
Therefore, under the present law a person with £20 in Co-operative shares will have to pay tax on the interest up to £15, while a wealthy person with thousands of pounds invested may get off scot-free in this respect.
For over 100 years co-operative societies have encouraged thrift, have canalised the small savings of the working class, and have followed the practice of investing their capital surplus to trading requirements in Government securities. At the moment, nearly 30 per cent. of Co-operative investment is in Government securities.
The Royal Commission on the Taxation of Profits and Income had something to say about this problem, and recognised the two points I have made. In paragraph 67, page 21, it says:
We do not see our problem, therefore, as that of deciding whether there should be any relief for personal saving if there cannot be relief for all such saving. It seems to us rather that we should consider how far the present reliefs are justified as a departure from a general equitable principle. At any rate, we can take as our starting point the view that the tax system, if it does give relief for saving, should aim at securing that whatever reliefs are given should be carefully controlled, so as to avoid the risk of relief for what is really delusive saving—
in talking of "delusive saving", the Royal Commission obviously had in mind this kind of transfer saving—
and should be available to as wide a range of taxpayers as possible, so as to minimise unfairness in the distribution of the benefit of the relief.
The Royal Commission was obviously concerned that there should be fairness in the incidence of this tax or relief from it.
The Co-operative Congress, in 1956, had a prolonged debate on this matter, and speakers from all parts of the country deplored the action of the Chancellor in excluding Co-operative share capital.

The Congress unanimously passed the following resolution:
That this Congress deeply regrets the failure of the Government to include Co-op share interest in the Budget concession exempting from Income Tax the first £15 of interest on deposits in the Post Office and in ordinary departments of trustee savings banks. We feel that it is wrong in principle to introduce further discrimination between different forms of saving which will result in the transfer of savings rather than the encouragement of new savings.
The congress went on to deplore this discrimination, and urged the Government to include in this concession Cooperative share capital and, indeed, the Penny Bank savings account because it said, in particular, that the interest was limited and a holding of such share capital was limited to £500.
Co-operative societies continue to play an important part in promoting thrift. The amount returned in dividend in 1958 amounted to £59 million, and over the last fifty years or so the amount returned by way of dividend on purchases has run to over £1,000 million. Apart from that contribution, 760 retail societies maintain small savings departments, and in 1958 the total amount of small savings was £7·8 million—quite a remarkable contribution.
In many cases, this capital has been painstakingly accumulated, year by year, from the dividend on purchases, and in our view there is a very strong case for extending this tax concession to Cooperative share capital and to the Penny Bank account. We hope that the Chancellor, who is a fair man, will be able to accept the new Clause, and so end an injustice that co-operators have suffered since 1956.

Mr. R. Gresham Cooke: While some people would like special privileges for shareholders of co-operative societies, I and my hon. Friends who have tabled the new Clause—Relief from income tax on investment income—would like to see a much wider approach to the subject, so that all investment income up to £15 per annum from stocks and shares should be tax-free in the hands of the taxpayer. We are really more concerned with the general position, and with the shortage of capital that is evident in British industry, both nationalised and private.
Some of us are concerned about the statement in the World Economic Survey, recently published, which shows that the rate of growth of capital investment in the United Kingdom—and, indeed, in the West generally—is no greater in the 'fifties than it was in the 'twenties. I myself cannot help being alarmed by the fact that Britain does not figure at present, nor has she during the last few years, among the top ten industrial nations with regard to the growth of capital investment. It is, therefore, quite obvious that we have to re-establish the virtue of thrift and saving.
We have to bring back to the country once again a Victorian sense of thrift and saving. That feeling, of course, was grievously slaughtered in the first few years after the war by high taxation, by inflation, and by people feeling it was not worth saving because they did not know what their money would be worth in a few years' time. Fortunately, saving is now going on at a much higher rate than it was a few years ago, but I believe that the savings of the man in the street are all being canalised in one direction.
A solicitor constituent of mine has a very wide practice among the occupiers of houses in both council housing estates and owner-occupier estates. Those living there include manual workers, clerical workers and, ordinarily speaking, the lower-grade workers. My friend deals with the winding-up of a large number of estates of small people. He tells me that the interesting thing is that in all those estates there are only five forms of property that a man possesses when he dies. They are cash in hand and at the bank, a small insurance policy, money in Post Office savings, money in National Savings, and, possibly, if he is an owner-occupier, his own house or bungalow.
That means that, generally speaking, the man in the street, although he may want to invest in British industry, is not doing so at present. My solicitor friend also tells me that a man who owns under £5,000 of capital does not invest in stocks and shares. One of the deterrents there is that he has to pay the full standard rate of Income Tax on all the interest from his holding, whereas, by investing in his Post Office Savings Bank, he has the advantage of getting the first £15 of

interest tax-free, and on National Savings he does not have to pay any tax at all.
I should, therefore, like to see my right hon. Friend the Chancellor bring in a provision which gives equity of treatment for the shareholder and the stockholder vis-à-vis the owner of Post Office Savings and National Savings. We have to help the small saver to come into British industry—and not only the nationalised industries, but private industry as well. We want to see him investing in, perhaps, his own company, in unit trusts and in companies generally. We also want to see companies assisting their employees to invest not only in National Savings, but in industrial companies. In short, we really want to see a Tory property-owning democracy not only of houses but of industrial shares and investments as well, and I have much pleasure in asking my right hon. Friend to bear this in mind.

4.0 p.m.

Mr. J. Grimond: I am very glad to follow the hon. Member for Twickenham (Mr. Gresham Cooke) on the note of encouraging small savings. Earlier in the Committee proceedings on this Bill we had a short discussion about the nature of small savings, and I think that it is apparent that what we call small savings do not necessarily come from small savers. A great deal of them are now contributed by people who find the savings schemes, originally designed for small savers, of great assistance to them when they come to reckon their liability for Surtax. Those people are not, in the strict sense, small savers at all.
This type of provision would give a general encouragement to the small saver. We, as Liberals, had tabled a new Clause, which has not been selected and which it would be improper to discuss, in which we suggested that special accounts might be opened for those who are prepared to save some of their income. I agree that it is important today both to spread property and also to encourage more people in the country to take an interest in the running of the country's business, whether it be Cooperative, private or nationalised business. We have a mixed economy and we have to look to all sides and make its awards more fairly shared than they


are at present. I am well aware that this proposed new Clause applies only to certain institutions, but I like it none the worse for that. It goes only a small way, but that is better than going no way at all.
This afternoon we have heard the famous phrase—a Tory property-owning democracy. It rings round the country at election times, but it is usually rather muted during Finance Bill debates. I hope that in spite of the setback yesterday over Schedule A, the Chancellor may be in a more forthcoming mood today. He has, no doubt, been reading the enormous volume of the many speeches he has made, both to his own company and at many elections, pressing for the savings of the small saver and encouraging the workers to save.
We look forward to hearing the battle cry of a Tory property-owning democracy and the demand for Tory philosophy, which we hear a good deal about, being translated into an actual enactment on the Statute Book.

Mr. Denzil Freeth: I gather that we shall have an occasion later today to discuss the Liberal attitude to property owning and shares, so perhaps I may reserve comments on the speech of the hon. Gentleman the Member for Orkney and Shetland (Mr. Grimond) until then.
It is worth remembering, when discussing this proposed new Clause, exactly why the concession of the first £15 of interest on Post Office Savings Bank and Trustee Savings Bank accounts was introduced by my right hon. Friend the Prime Minister and my right hon. Friend the Chancellor of the Exchequer. The reason is twofold. First, it was to encourage savings, but it was particularly to encourage those forms of savings where the money was lent to the Government of the day. I remember the debates in which particular attention was paid by both sides of the Committee to trying to find a form of wording to cover every kind, so to speak, of trustee savings bank where the bank lent its assets to the Government.
If I remember those debates aright, it was because the co-operatives did not come within these terms of definition that they were excluded. I should, therefore, be rather doubtful whether it would be right and proper to depart from the

canons, if I may so call them, of 1956, unless one goes to the extent proposed in the Clause of my hon. Friend the Member for Twickenham (Mr. Gresham Cooke). I should very much like to see the Clause of my hon. Friend translated into the law of the land. I believe that it would do nothing but good.
I know that it is always possible to argue that the Stock Exchange is having a fairly prosperous time and, therefore, we need do nothing to encourage it. I know that it is also possible to say that the unit trust movement is having such a great success that there is no need to take this step. But I should have thought that it was a step for the good of the country as a whole, both for increasing savings in the widest possible sense to cover industrial savings and for increasing share ownership throughout our people, to have this on the Statute Book. I do not know what the Clause of my hon. Friend would, in fact, cost. It may well be that the cost puts it out of court this year, but I hope that the Chancellor will remember it when framing future Budgets.

Mr. Norman Dodds: Will the hon. Member, having stated that he is in support of the proposal of the hon. Member for Twickenham (Mr. Gresham Cooke), say whether he is also as enthusiastic in his support of the proposition put forward by my hon. Friend the Member for Dartford (Mr. Sydney Irving) in connection with the co-operative societies?

Mr. Freeth: I am sorry if I did not make myself clear to the hon. Gentleman. I think that it would be probably wrong just to widen the exemption from the tax to bring in the co-operatives, and if I were to depart from the principles laid down by the Prime Minister and the Chancellor of the Exchequer in 1956 I would prefer to include all manner of income.

Mr. John Rankin: The debate so far has shown a measure of agreement on both sides of the Committee, including agreement with the point of view expressed by my hon. Friend the Member for Dartford (Mr. Sydney Irving) and, I think, explicity stated by the hon. Member for Twickenham (Mr. Gresham Cooke) when he demanded for his Clause the privileges which were extended to the


Post Office and to those holding National Savings certificates. Of course, that is one of the points which we are making in our new Clause. We differ from him in that he seemed to say—I think that he used the words exactly, that we were, in the proposed new Clause before the Committee, seeking special privileges for the Co-operative investor. We are not doing anything of the kind.
We are protesting against the discrimination which is exercised by the Government against the Co-operative movement and which has been exercised by this Government for a very long time. We are asking not for a special privilege of any kind. We are merely asking to be treated in the same way as the Government, in the 1956 Act, decided to treat the Post Office. I do not want to go too far into the hon. Member's speech, but he made one or two very interesting statements.
I agree with him—I think that we all do—that we want to see a balanced attitude in regard to investment, whether it is for domestic purposes or any other purpose. But we do not want to see people today investing more of the weekly or monthly income coming into the household than is advisable. It happens, unfortunately, very often that too big a strain is put on the weekly income by investing too much. That is my view. We want to see more savings, but the country will not get more savings if we discriminate against a particular form of savings as the Government are now doing.
The hon. Member referred to the fact that the rate of the growth in capital investment today was no better than it was in the 1950s.

Mr. Gresham Cooke: The 1920s.

Mr. Rankin: We wonder how far that attitude has been created and fostered by the Government who have gone on preaching to the people, "You have never had it so good." If we instil into their minds that sort of philosophy they seek to live up to it by not saving so much as we should like to see them save and spending, in many cases, perhaps more than they ought to spend in relation to their income.
The hon. Gentleman concluded by asking for equality of treatment—pre-

cisely what we on this side of the Committee are seeking. I hope that, unless the Chancellor changes his mind as a result of the arguments which will he presented, the hon. Gentleman and his hon. Friends who support him will march through the Lobby with us to emphasise our attitude on both of these Clauses.

Mr. Gresham Cooke: May I make it clear that I asked for equality of treatment of all invested income and not only of dividends from the co-operative societies?

Mr. Rankin: The hon. Gentleman will not deny that Co-operative savings are part of all invested income, and, therefore, his support must be given to the new Clause which we have proposed.
The hon. Member for Basingstoke (Mr. Denzil Freeth) said that the reason for excluding the co-operatives from the Finance Act, 1956, was that the Chancellor wanted to give the privilege only to those who invested their savings with the Government. He must surely know that out of total savings of £250 million in the Co-operative movement, about £80 million goes in Government gilt-edged. Therefore, since the hon. Gentleman wants to help those who help the Government, I hope that he, too, will march, if necessary, with his hon. Friend the Member for Twickenham through the Division Lobby.

Mr. Denzil Freeth: indicated dissent.

Mr. Rankin: The hon. Gentleman says things, and immediately he is pinned down he moves his head in the wrong direction. He ought to be moving it vertically and not horizontally.
Of course, the Chancellor may save us a great deal of trouble, and I hope he will, by agreeing to the proposition put forward by the hon. Gentleman as well as to the new Clause which we are advancing. He is tremendously interested in the problem of savings. In his Budget speech he told us that he was faced with an overall deficit of £331 million this year. But it should be recognised that that £331 million does not meet all the expenditure outside the Budget. That is only the deficit in budgetary terms. There is considerable expenditure outside the Budget altogether and, while we do not know what


that is for this year, perhaps before we leave the Report or Third Reading we shall be able to get an idea of what that expenditure is.
But if I take last year's Budget, where there was a deficit of £181 million which had to be met by borrowing, the extra budgetary—

The Temporary Chairman: Order. The hon. Member is straying a little wide of the subject of relief under Section 9 of the Finance Act, 1956.

Mr. Rankin: I know that patience is a great virtue, Mr. Arbuthnot, and I am straining it a little, but I am coming to a very important point and am using this argument as an illustration to advance that point. That is all. I am not going too far. I was merely pointing out that in last year's Budget there was a deficit of £181 million—

The Temporary Chairman: I was pointing out that the hon. Member was going too far.

Mr. Rankin: I shall be very brief, Mr. Arbuthnot.

The Temporary Chairman: That does not put the hon. Member in order.

4.15 p.m.

Mr. Rankin: It may be permissible to point out that there is extra budgetary expenditure which the Chancellor has got to meet, and in the previous Budget it reached £425 million which was met to a large extent by the small saver for whom we are speaking today. There are many contributions to that expenditure, but the most important one was the £303 million which the small saver gave to the Chancellor in that financial year to meet this expenditure, of which we heard nothing at all in the course of the Budget and about which we only hear as a result of investigations that go on from time to time within the Department for which the right hon. Gentleman speaks.
The right hon. Gentleman himself, in his Budget speech, emphasised savings as an important factor in the attainment of the expansion which we all want to see. Since there is this importance attached to savings by the Chancellor—in fact, by the Government and their supporters as a whole—it is strange that they should discriminate against one organisation alone which is seeking to provide the

Chancellor with some of the money that he needs.
One example of discrimination has already been given by my hon. Friend the Member for Dartford—the discrimination in favour of the Post Office and the trustees savings banks which is denied to the Co-operative movement. That is one example of the discrimination which exists today. Of course, we do not object to the first £15 of money in the Post Office being free of tax. We welcome it. But we would like to see the Chancellor taking similar action with regard to Co-operative investments.
Then again, my hon. Friend mentioned the case of the old-age pensioner who applies to the National Assistance Board for supplementation. We argued this matter very strongly last year. The first £125 of his Co-operative savings are exempted from the assessment of his means, but if they happen to be in the Post Office the amount is stretched to £375, which is exempted from that assessment. My hon. Friend properly mentioned the extraordinary case which was pointed out by the Radcliffe Committee where people of great wealth are completely exempted from paying any tax whatsoever while the person who owns £20 in a co-operative society is compelled by the right hon. Gentleman, a very kindly gentleman, to pay tax on the interest yielded by that small sum.

Mr. Denzil Freeth: Would not the hon. Gentleman agree that the very rich man with money in the Post Office Savings Bank is not exempted from tax altogether?

The Temporary Chairman: Order. I think that this is going a little wide of the new Clause under discussion.

Mr. Freeth: With all due respect, Mr. Arbuthnot, are we not discussing the extension of the £15 tax-free investment to other forms of saving?

The Temporary Chairman: Yes.

Mr. Freeth: I was trying to suggest to the hon. Member that he was a little inaccurate in what he was saying, since the very rich man would have to pay Surtax on the £15 grossed up.

Mr. Rankin: We do not, of course, object to him doing that if we in the


Co-operative movement can have the equity and fairness which the hon. Gentleman and his hon. Friend the Member for Twickenham say that they want for the particular group about which they are speaking.
I will give another example of discrimination. The joint stock companies have been particularly favoured by the Chancellor because he has reduced their rate of Profits Tax during the last two years from 30 per cent. to 10 per cent. and then up to 12½ per cent. For the Co-operative investor, he has increased taxation from 3 per cent. to 12½ per cent. In my view, it is very difficult to defend that kind of discrimination, and I shall be interested to hear whatever defence is advanced.
In limited liability companies, Profits Tax falls only on the shareholders, not on the purchasers. Taxation falls on both shareholder and purchaser in the case of co-operative society members who shop at the co-operative stores. This, again, is unfair and discriminatory. The latest example is in this Budget, where the pool from which dividend is to be paid will be reduced by £1¾ million as a result of the overall increase in the Profits Tax which I mentioned. Again, there is no limit whatever to the potential dividend payable upon ordinary shares in a limited liability company. There is a limit to the interest paid on Co-operative shares imposed by the Government through the Registrar of Friendly Societies.
The right hon. Gentleman has said that he wants savings. Hon. Members on the Government side say that they want more savings. We wish to help in providing those savings which are essential for the purposes which I sought to outline, Mr. Arbuthnot, but with insufficient co-operation from the Chair. I am puzzled to know why the Chancellor treats the Co-operative movement as he has been treating it for several years. The discrimination against it—I say this with hesitation—is frigid and calculated. It is no error of judgment, because it has been continued.
I wonder whether the right hon. Gentleman realises that the Co-operative movement is more than just a trading organisation. It is a movement which devotes some of its trading surplus to

fostering within the community those higher ideals, those higher loves and nobler cares, to which the Chancellor and all his hon. and right hon. Friends subscribe.

The Chancellor of the Exchequer (Mr. Derick Heathcoat Amory): The hon. Gentleman is very good, but, although he has been talking a great deal about discrimination against the Co-operative movement, there is no discrimination against it whatever. I have often paid tributes to the good qualities of the Cooperative movement. There is no discrimination against it of which I know.
The hon. Gentleman reminds me of the Aberdonian I once heard of who, when the bus fares in Aberdeen were reduced, complained of discrimination against him because he would not in future save so much as he had done by walking.

Mr. Rankin: The Chancellor has a very easy way out of the charges which, with the best motives in the world, I am launching against him and his Government. His easy way out is to accept the new Clause to which I have been speaking. I have given examples of discrimination to show that the difference in treatment between, shall I say, the Post Office Bank and trustee savings banks and the co-operative societies is unfair. The right hon. Gentleman says that he has paid tribute to the co-operative societies. The greatest tribute he can pay is now within his grasp. Let him accept the new Clause which I am supporting and give to the great Cooperative movement the justice which has been so long delayed.

Mr. Maurice Macmillan: I am very happy to join in the all-party tribute to the property owner-investor. I agree with a part of the speech of the hon. Member for Glasgow, Govan (Mr. Rankin) which seemed relevant to what we are discussing. To encourage savings at this time, it is necessary to encourage and help the small saver to invest. Perhaps I ought to make clear at once that it is new Clause No. 73—Relief from Income Tax on investment income—which I support, not new Clause No. 17—Extension of relief under section 9 of Finance Act, 1956.
I and my hon. Friends wish to remove all discrimination and to give encouragement to all small investors. I really


cannot agree with hon. Gentlemen opposite who suggest that merely by extending the number of privileged people one necessarily does the same thing as abolishing privilege. Indeed, in my view, to do so would really remove the Co-operative supporter from the general principle that the small saver should be helped.
I should be out of order, and probably repetitive, if I went into great detail to explain why I think that it is very important at this moment to encourage savings, but there is one comment which I ought to make. We all agree that there is a shortage of capital. Only yesterday, in the Evening Standard, the Chancellor of the Exchequer was reported as saying that
We do well to bear in mind that the demand for capital is likely to be greater than the supply over the years ahead. The Government cannot, without distortion of the whole economy, insulate itself from the effects of this basic factor".
I urge the Chancellor to remember that one method of dealing with this matter would be to increase the supply, not just to restrict the demand. Whether the need arises from our balance of payments, because of shortage of capital overseas, or for home development, it is by increasing the supply that we can help to achieve expansion without the danger of inflation. This principle was even more strongly behind the other new Clauses which my hon. Friends and I had put down, but which I should be out of order in mentioning now. It is behind the new Clause to which I am speaking and, in my view, it has so far been somewhat ignored by those who have spoken from the Treasury Bench.
Yesterday, the Chancellor said:
I made it clear in my Budget statement that in present conditions of brimful demand it would be irresponsible to add to purchasing power by a net decrease in taxation, and that such a conclusion—which has not been really seriously disputed—puts out of court this year acceptance of any of these new Clauses."—[OFFICIAL REPORT, 21st June, 1960; Vol. 625, c. 267.]
It certainly would not put out of court the new Clauses put down by my hon. Friends and myself, because the loss of income to the Treasury would arise only to the extent to which the purchasing power of the individual would be reduced by savings.
4.30 p.m.
The same principle lies behind the proposed new Clause No. 73. I admit that it leaves a small extra amount of purchasing power in the hands of the small investor in that the first £15 of his income from investments are tax-free, but I think that the Committee will agree that this is more than outweighed by the extra incentive and inducement to save. I cannot understand why the admitted impossibility of adding to the purchasing power means that we must have a negative and restrictive approach to the problem in this Budget. I wish that the Chancellor could have taken the opportunity to clear up this anomaly—he does not like the word "discrimination"—together with some of the others which have been mentioned.
The new Clause to which I am speaking is one of what might be called "the £15 Clauses". There are three of them altogether. The first asks for relief on Schedule A to the tune of £15. The new Clause under discussion asks for relief on investment income from certain specified sources. New Clause No. 73 asks for relief on investment income from all sources. New Clause No. 73 would probably provide the biggest extra inducement to save, because it is framed not to be alternative but additional to income derived from trustee savings banks and the Post Office Savings Bank.
That was done deliberately to meet the sort of objections raised by my hon. Friend the Member for Basingstoke (Mr. Denzil Freeth), to the effect that to get the maximum relief the investor has to invest both in ordinary shares and trustee savings banks or the Post Office Savings Bank.
I should like to add my plea to the Chancellor to cease discrimination. I cannot believe that the Government think it wrong to invest in industry, or that it is wrong that the public should be encouraged to own shares individually instead of collectively. I am glad that this is a completely non-party point. I am sure that hon. Members opposite, however much they may wish to restrict investment in the private sector of industry, would like to see that sector owned by small shareholders to the greatest possible extent.
Too often the home owner is the only man who strikes the public imagination.


The hon. Member for Loughborough (Mr. Cronin) yesterday made a moving plea to help those sheltering their wives and children and even their ailing and aged relatives. I agree that they deserve support, but what about those who send money to their aged and ailing relatives and whose job keeps them on the move? I do not think that it is right to prescribe the free choice of the individual to this extent. Not everyone wants to own his own home or to invest in co-operative societies. I think that those of us who support this new Clause would want to see a freer choice given to all—in other words. to remove all discrimination.
It was the present Prime Minister, when Chancellor of the Exchequer, who, in 1956, introduced the provision which freed from Income Tax the first £15 of interest from Trustee Savings banks and the Post Office Savings Bank. It was also the present Prime Minister who introduced the Premium Savings Bond, which added an element of capital gain to the inducement offered to the small saver. I urge that this extra inducement to the small saver should be extended by encouraging him to invest in industrial equities. I am not suggesting that he should be encouraged to gamble either on the Stock Exchange, or on football pools, but I suggest that that is an element of extra inducement which would help people to save and encourage them to put their money not only into the more conventional outlets of the small saver, but also into industrial equities.
I do not think that we are asking for very much. We are not asking for more purchasing power, or for preferential treatment in any way. I hope that the Minister will give a sympathetic answer, because I do not think that it is a great deal to ask a Conservative Government to demonstrate their belief in freedom by giving the maximum possible freedom of choice to the small investor.

Mr. Laurence Pavitt: Throughout this debate there has been a remarkable degree of unanimity on both sides although we are discussing two separate Clauses. I am not so optimistic as I might have been a few months ago, having seen yesterday in the House what appeared to be a

minority of one, the Financial Secretary, and yet, when it came to the vote, the figures showed that unanimity did not follow into the Division Lobbies.
In discussing both Clauses I think that we have been concerned with the extent of small savings and with the encouragement of that particular sector of the economy. The hon. Member for Halifax (Mr. Maurice Macmillan) will, I think, carry us with him to a great extent in asking for more investment on the part of small savers in industry. I am particularly concerned to support the New Clause No. 17. Therefore, I want to put the emphasis rather on the mutual and the co-operative industry rather than private industry. It is a matter of emphasis rather than difference.
In moving his new Clause, the hon. Member for Twickenham, (Mr. Gresham Cooke) struck a note very much in accord with what we on this side have in mind When he referred to the basic Victorian virtue of thrift. This is something on which the British Co-operative movement was built in the Victorian age. It is a basic thing which we have succeeded in extending to every village and town in the country and upon which the Co-operative movement has been successful.
I agree with my hon. Friend the Member for Glasgow, Govan (Mr. Rankin) that this is a question of discrimination against a large organisation, an institution enabling small savings to accumulate. The Finance Acts make it so that one large institution, the national institution of the Post Office Savings Bank, has certain facilities whereas another institution, a voluntary mutual association, is excluded from those advantages.
The Government have an ambivalent attitude towards the Co-operative movement because they do not understand it. The Secretary of State for Commonwealth Relations and the Colonial Secretary fully understood the important part of active participation in thrift organisations overseas. The hon. Member for Orkney and Shetland (Mr. Grimond) stressed the importance of participation, and I agree with him. In the early part of the century, the Government took action in India to encourage thrift through co-operative societies throughout that country. In 1897, Sir Frederick McLaglan produced his famous report on


village credit and thrift which led to the whole of a Government Department being devoted to promote co-operative societies throughout India and subsequently Asia. Colonial Office ordinances are at present issued through official channels to encourage officials in the Colonial Service to promote co-operative societies with the idea that the indigenous population shall have thrift and self-help organisations to enable them to develop economically and socially from their own resources.
In this country, as my hon. Friend the Member for Dartford (Mr. Sydney Irving) so ably said, we have 12½ million people who co-operate in their own institutions. But whereas the Government are fair in trying to encourage this type of development overseas, and at various times in recent history have gone out of their way to enable people to participate in local organisations in order to govern themselves through this "grass roots" democracy, when it comes to our own country, which is the home of this movement, Government actions, particularly those of the Treasury, dampen down endeavour and prevent the natural and continual growth of the Co-operative movement.
I do not understand why the Chancellor cannot see the natural advantages of this national organisation whereby ordinary people are encouraged to save. It is not merely an exhortation of encouragement to save—it is automatically done for them. The accumulation of their dividend on purchases is really a deferred discount. At the end of the half year there is a tendency not to take the trouble to draw it out, but to leave it there to accumulate as part of the small savings movement. Yet the action of the Chancellor in 1956 and 1957 discouraged this. We could redress the balance and encourage people to leave their dividends to accumulate, if only they have the same facilities there as they would have if they put the money in the Post Office. They should have the same advantages from the point of view of supplementary pensions.
The acceptance of our Clause would stop the present trend towards the dispersal of savings. The social system under which we live today means that there is a constant pressure for the purchase of consumer goods. We cannot turn on television without being encouraged to buy a washing machine, or other durable consumer goods. The

brake is being applied on hire purchase, but, nevertheless, the tendency is still for people with small savings in the cooperative society, instead of leaving the money there to help buttress the nation's economy, to take it out and use as deposits for hire-purchase of these goods.
It is in the nature of co-operative societies that they invest their accumulations in Government gilt-edged. About 28 to 30 per cent. is invested in this way today. This is because of the basically different structure of Co-operative capital compared with joint stock or public limited liability company capital. It is withdrawable. and if a person has a £1 share he will only get £1 out. Company capital is only transferable, not withdrawable. The average is only £20 per member among the 12½ million members. That small figure means that what a person has is inevitably under pressure to purchase consumer goods.
If Co-operative members were able to sell on the Stock Exchange it would not be necessary for a co-operative society to hold large stocks of gilt-edged securities. As it is, it must always hold sufficient gilt-edged so that it can meet its commitments in case of a run of withdrawals. We thus have these millions of pounds invested in Government securities and the Co-operative movement is doing the Chancellor's job for him. It is doing it by channelling small investment into Government securities.
A society near here has nearly 48 per cent. of its total accumulation reinvested, not used in trade, and nearly 37 per cent. of that is in gilt-edged. In view of the present fiscal policy of this Government, I wonder whether we are not reaching a stage where the tendency is against gilt-edged securities and rather for equities. I do not think that it can be the Chancellor's intention in the long term to channel more and more money into speculative ventures rather than into solid, easily realised investments.
I hope that the right hon. Gentleman will accept our Clause. Here is a ready-made national network which could absorb, every six months, as the dividends of purchases became due, a large amount of small savings. It needs the same encouragement that he gives to Post Office savings and to the Government side of affairs, in order that it can


do its job efficiently and well. The facilities are there and we ask him to use them.

4.45 p.m.

Mr. Dodds: My intervention arises from the delightful intervention of the Chancellor of the Exchequer, who once again came to the Box—and we welcomed his doing so—and testified to the value of the Co-operative movement. Then he proceeded to show that he does not understand it very much, and I suggest that he is such a champion of the Co-operative movement at the Box, he should try to understand the point I propose to make.
He made his intervention because of what my hon. Friend the Member for Glasgow, Govan (Mr. Rankin) had been saying about discrimination, and he told us a delightful Aberdonian story which, although it was enjoyable, did not seem to fit. The question of discrimination is used, and, I suggest, quite rightly, in this sense: in 1956 the Chancellor of the Exchequer introduced this concession for Post Office savings, and for ordinary—I emphasise ordinary—savings in the trustee savings banks. As a result of the experience gained it has been shown that small savings accumulated by dividends in co-operative societies have been withdrawn and put in to these other funds. It is believed, therefore, that this is discrimination, because, at the least, it is handicapping the Co-operative movement in regard to small savings. It is felt that the Co-operative movement, which channels much of its small savings into Government securities—and that fact is not denied—is handicapped as a consequence of that concession given to the Post Office and to the trustee savings banks.
I support the claims made by the hon. Member for Twickenham (Mr. Gresham Cooke) on behalf of all small savers, and agree that it would be a good thing. But I say to him that there is a better case on behalf of the Co-operative movement in the sense that he and his hon. Friends have referred to all small savings, whether or not they are channelled into Government securities. A very big percentage of the small savings of the Co-operative movement is channelled into Government securities.
It was on that line that in 1956 this concession was given to these other two bodies, which also put the money into Government securities. On that point I feel that Members opposite must support our new Clause, which was ably moved by my hon. Friend the Member for Dartford (Mr. Sydney Irving). I believe that there is unanimity in the Committee—except on the Treasury Bench—that both Clauses would be a jolly good thing for the country. I hope that the Chancellor will show his regard for the Co-operative movement by accepting our Clause, because a little assistance is better than a lot of praise from the Dispatch Box.

The Economic Secretary to the Treasury (Mr. Anthony Barber): The proposed new Clause moved by the hon. Member for Dartford (Mr. Sydney Irving) and the new Clause in the name of my hon. Friend the Member for Twickenham (Mr. Gresham Cooke) differ in certain material respects, to which I will refer later, but they both raise a common question of principle. They or their implications cannot be understood without considering, first, the limits of the present exemption and the reason for those limits.
In 1956, my right hon. Friend the Prime Minister, then Chancellor of the Exchequer, introduced what was known popularly at that time as a savings Budget. One of the proposals which he put to the Committee was to relieve from Income Tax the first £15 of income accruing to individuals from deposits in the Post Office Savings Bank and in the ordinary departments of the trustee savings banks. This proposal was limited to those two institutions for the two reasons which have been mentioned by my hon. Friend the Member for Basingstoke (Mr. Denzil Freeth), and I was somewhat surprised that the hon. Member for Dartford did not refer to those two important reasons for applying the relief only to those two institutions. It may be that he did not do so because he set such an admirable example by making a very short speech.
The two reasons were that the rate of interest was fixed for these two institutions at 2½ per cent. and the savings passed automatically to the Exchequer because they were invested with the National Debt Commissioners.

Mr. Rankin: The hon. Gentleman will realise that the rate of interest is also fixed by the co-operatives.

Mr. Barber: Not at 2½ per cent.

Mr. Rankin: There is not a single but a variable fixing between 2½ per cent. and 3½ per cent. That is the variation allowed.

Mr. Barber: Yes, but the point was that in these two institutions the rate of interest was fixed at 2½ per cent. Indeed, in the case of the trustee savings banks it has been so fixed since the last century.
The reasons for this exemption have not changed since the time when the concession was made. I should like to quote a passage from the Prime Minister's speech, as Chancellor, in Committee in 1956, when he was emphasising the need to restrict the concession to savings institutions which had these two features. He said:
First, that the rate of interest should be static at 2½per cent., and that the money saved would pass directly to the Government. It would therefore assist the Government's monetary policy because more of the State's borrowing needs would be met without increasing the liquidity of the joint stock banks."—[OFFICIAL REPORT, 7th June, 1956; Vol. 553, c. 1437–8.]
The reasons which were given then are Just as cogent now.
There is nothing arbitrary about the two criteria which were adopted. In fairness, and in view of what has been said, I should remind the Committee that in debates at that time the Government said that they were prepared, in principle, to extend the relief to any savings institutions which were ready to accept the two essential features of a 2½ per cent. rate of interest and direct investment on deposit with the State.

Mrs. Harriet Slater: The concession was not made to the co-operatives.

Mr. Barber: I would remind the hon. Lady that the Bill was amended at that time so that advantage could be taken of that offer by the Birmingham Municipal Bank. This relief was intended as a specific inducement to the small saver to lend to the Government and for that reason it was confined to individuals and to deposits which attracted 2½ per cent. It did not extend to corporate bodies.
The purposes of the new Clause proposed by the hon. Member for Dartford is to extend relief to dividends or deposit interest from societies registered under the Industrial and Provident Societies Acts and friendly societies. Far and away the most important societies included in the Clause are the co-operative societies and about three-quarters of the cost of the hon. Member's proposal would be in respect of those societies. The hon. Member for Glasgow, Govan (Mr. Rankin) said, "We are asking for the co-operative societies to be treated in the same way as the trustee savings banks". In 1956, when this matter was discussed and that very point was considered, Mr. Frank Beswick, who spoke in the Committee at that time for the co-operative societies, said that that would be, to use his own words, "absolutely unworkable".
I would say, with great respect to those who have spoken, that it is absolute nonsense to say that there is discrimination against the co-operative societies. It is perfectly true, as has been said, that part of the surplus funds of cooperative societies are invested in Government securities but that may merely involve the purchase of those securities from other holders. In any case, money invested in co-operative societies is used primarily to finance trading. These societies are not purely savings agencies.
The proposal in the new Clause is really discriminatory and I would have thought that it was quite impossible and, indeed, unfair to withhold a similar concession from a wide range of other institutions whose case is equally strong. I ask the Committee, for these reasons, not to accept the proposal.

Mr. Rankin: The hon. Gentleman quoted Mr. Frank Beswick, a former Member for whom we 'have the greatest possible respect, but he quoted him in reference to something which I assume Mr. Beswick said in 1956. The hon. Gentleman has taken the remark out of context. I assure him that practically all that has been said by my hon. Friends today has the full approval of the Cooperative movement.

Mr. Barber: There may well have been a change, but in that event it is a little surprising that the hon. Member for Dartford did not refer to the two


essential criteria which were the whole basis of that Section of the 1956 Act which it is proposed to extend by means of this Clause.

Mr. G. R. Mitchison: Will the hon. Gentleman tell us What the new Clause would cost? I remind him that the information was asked for in 1956 and 1959 and it has not been given.

Mr. Barber: It would cost £2 million in a full year.

Mr. Sydney Irving: Will the hon. Gentleman deal a little more fully with the dangers of the transfer of past savings from the Co-operative movement, or any other small savings organisation of that sort into Government channels, particularly in view of the reference in the Royal Commission's Report to delusive saving? Is there not this danger? Has it not happened and cannot the hon. Gentleman do something about it?

Mr. Barber: I made inquiries today about that point and I was told that there was no evidence that depositors or shareholders in co-operative societies had switched on a large scale.

Mr. Dodds: This is important. Since the hon. Gentleman has made inquiries, will he give us the source of his information, so that we may assess it?

Mr. Barber: I have not the details with me, but that was the conclusion drawn by those who advised me quite fairly from the facts.
The Clause in the name of my hon. Friend the Member for Twickenham is much bolder. It raises an issue of principle and is of a more general nature. As my hon. Friend the Member for Halifax pointed out, the Clause at least avoids the discrimination which exists in the new Clause moved by the hon. Member for Dartford. The purpose of my hon. Friend's Clause is to exempt from both Income Tax and Surtax the first £15 of an individual's income from investments other than interest in the Post Office Savings Bank and trustee savings banks. I should remind the Committee that the present relief applies only to Income Tax and not to Surtax, because, as I said earlier, its purpose was to attract small savings. Consequently, as my hon. Friend the

Member for Halifax pointed out, this Clause gives exemption to the first £15 of investment income in addition to the existing relief which applies to the Post Office Savings Bank and the ordinary departments of the trustee savings banks.
5.0 p.m.
Both my hon. Friends the Members for Twickenham and Halifax referred to the shortage of capital which exists in this country today, and I would not disagree with anything they said on that point. Both of them referred also to the fact that we should do everything possible and reasonable to encourage savings, and I can assure them—indeed, I would assume that they know already—that my right hon. Friend would certainly not disagree with them in any way when they say that the more savings we have in this country the better, because this is certainly one of the surest ways of helping the policy which my right hon. Friend is carrying out—doing his best to contain inflation.
It is at least doubtful, and I do not put it any higher than that, whether the sort of tax concession which is suggested in this Clause is the right way. I say that—and I do not put too much upon it—because the Radcliffe Committee, in its final Report, said that the tax system would be making—
…as much concession to savings as it is reasonable or proper that it should.
As I understand it, the object of the new Clause, together with the others which have either not been selected or not been called, is to encourage the wider spread of share ownership, and certainly with that object I am in wholehearted agreement. I think that I shall have a further opportunity tomorrow to deal more fully with this general question, but, in view of what my hon. Friend the Member for Halifax said, I should like to say now that I believe that the more widely spread is the money invested in any form of ownership, including industrial shares, the better for this country.
I am sure that my hon. Friend the Member for Twickenham is also very pleased indeed that he has managed to convert the Leader of the Liberal Party on the subject, if I understood him aright, of a property-owning democracy being translated into action. I am sure


that we shall all be waiting eagerly to see him translate his views into action in support of my hon. Friend at the next General Election.

Mr. Grimond: I hope that we shall have the opportunity to do so in the Lobby. I take it that there will be a Division. After all, the Minister made a most impassioned plea for savings and the wider spread of property ownership, and, no doubt, he will be in the Lobby, too.

Mr. Barber: I was coming to that very point. All the general arguments which I mentioned at the beginning also apply to the Clause in the name of my hon. Friend the Member for Twickenham, but now we come to the real crux of the matter.
My hon. Friend the Member for Basingstoke asked what this new Clause would cost, and the answer is that in a full year it would cost £40 million. As I think the whole Committee will realise, this is the overriding reason why we could not, in any event, contemplate such relief at this time. I hope that my hon. Friends will appreciate this point. I do not want to waste the time of the Committee by going over again all the arguments regarding the state of the economy and taxation which my right hon. Friend deployed during the Budget debate and during the Second Reading of the Finance Bill. I would only say that to give relief to the extent of £40 million in this way would run completely counter to the view which my right hon. Friend has taken of the economy.
This is the overriding reason why we could not, in any event, advise the Committee to accept this new Clause at this time. I hope that my hon. Friends will appreciate the point, and will agree that we have, in any event, had a most useful discussion, which, to some extent, we can continue and expand tomorrow.

Mr. Nabarro: Before my hon. Friend sits down, he has said that we can continue this debate tomorrow. Does he mean that we are to sit all night and in the morning?

Mr. Barber: I am sorry. I meant Friday.

Mr. Nabarro: That is better. My hon. Friend put the fear of God into me.

Mr. Barber: I am sorry.

Mr. Mitchison: What the Economic Secretary has said really will not do as an answer to our new Clause. I am not going to say much about the new Clause in the name of the hon. Member for Twickenham (Mr. Gresham Cooke). I go this far with the Economic Secretary. After all, if he were to concede £40 million to investors of all classes and of all magnitudes, and, at the same time, take £40 million by increasing the duty on tobacco, he would make the Tory Party look even more ridiculous than it sometimes makes itself look.
What we are concerned about on this side of the Committee is not a property-owning democracy at the moment, but something very much simpler than that. It is the effective savings of people working for weekly pay packets. The hon. Member for Twickenham gave a list—very suitable for Twickenham—of the uses to which a friend of his had found that savings were put in that salubrious part of the country, and they consisted of the Post Office Savings Bank, the trustee savings banks and forms of life insurance. I simply point out to the Committee that all these forms of investment are already getting fiscal aid and fiscal advantages. The first £15 in the Post Office Savings Bank, the trustee savings banks and life insurance get, and for a long time they have got, a concession by way of Income Tax.
Twickenham is not an absolutely typical part of the country. There are a great many other parts of England in which everybody would be shocked and surprised if the local Member got up and said where the local savings were put and did not mention the co-operative societies. I can assure him that in my own constituency, which, in many ways, is a rather typical part of the country, this is probably the most important place in which to find small savings, and if that goes for the Midlands, I am sure that it goes for the north of England, too. It is perfectly true that in a great many parts of the London area—

Mr. Gresham Cooke: Perhaps I should make it quite clear that the solicitor to whom I was referring has a very large practice around Twickenham, including a large industrial area which is represented by the hon. Member for Feltham (Mr. Hunter).

Mr. Mitchison: Having experience of solicitors, I think that even they can sometimes learn something, and perhaps the hon. Gentleman's friend would not deny—or, if he does deny, would find out—that a very large part of working-class savings goes into this particular channel.
After all, the figures are good enough. They were given by my hon. Friend who moved the new Clause, and we all know, as a matter of ordinary common sense, that deposits in co-operative societies are a typical form of working-class savings. Very often, the wives make the deposits and use them for something in the house or something of the sort later. It is a very good thing indeed, and I am sure that every hon. Member in this Committee knows about it. Therefore, there is really a social case why that form of savings should be treated in the same way as other typical forms of saving which already receive a fiscal concession.
We are told that it would cost £2 million. What are the real objections of the Government to it? The Economic Secretary fished out of the appropriate drawer in the Treasury, dusted and used again exactly the same words which the Prime Minister used in 1956 and which were quoted again by the present President of the Board of Trade in 1959. Does the Tory Party never change? Do hon. Members opposite not think it possible that at some time or other they might revise their views on a matter of this sort? After all, what was said in 1956 was said in a different context, although I would not suggest that we have gone that far since 1956. I thought part of the case of the party opposite was that the country was getting on better. If it is getting on better, then surely one of the most useful things that hon. Members opposite could do would be to give encouragement to this channel of working-class thrift on this occasion even if they have refused to do so twice before.
I have one other point to make, and I will make it quite shortly. I wonder if the Committee has noticed that this form of investment shares with the Post Office Savings Bank and the trustee savings banks one peculiarity which is that it is not going to bring any capital gain with it. One can call the reward that one gets when Ernie draws the

number of one's Premium Bond a capital gain, or, if one likes, the result of a successful gamble. In that field as in others they are not always easy to distinguish, but certainly one gets something which is not taxed.
Even a Defence Bond has an accretion of £2 or £3 which is not taxed. National Savings continue entirely on accretions from year to year, increasing as the life of the bond goes on and those accretions are not taxed. They all get this element of an increase of capital or, if one likes, a gambling increase, which is not subject to tax.
Of course, if the party opposite had its way with new Clause No. 73 the matter would become even more obvious. Look at the unit trust advertising nowadays. The first thing which it does is to point out that its shares have gone up and may go up again. Why should a form of investment which shares with the Post Office Savings Bank and the trustee savings banks the fact that it has no untaxed capital gain attaching to it be denied the fiscal gain in the other case? It is said, of course, "Well, it goes straight to the Government if it is the Post Office Savings Bank or the trustee savings banks." I am not going into a long argument about that, but my hon. Friends are perfectly right in saying that a considerable part of it filters through to the Government in that form.
We are considering savings, particularly the savings of working people in this country. I find an element of discrimination in this refusal to give the Co-operative movement what it wants in this respect. It is a form of saving which resembles more closely than any other the Post Office Savings Bank and the trustee savings banks investments which get their £15 free of tax. I regard it as discrimination, too, because it is primarily the working man's and woman's saving that is concerned.
After all, look at the party opposite. What did hon. Members opposite do? They put forward a new Clause that would cost £40 million, but they refused to support that part of it which would cost £2 million only. What they are practising is a form of fiscal apartheid, a kind of preference for the Clores and what-not of this world and a discrimination against those who save very little because they cannot save more and who


run a democratic movement—because that is what the Co-operative movement is—which does not depend on capital increments and the like but which does depend on savings of this sort.
I am sorry that the Government go on year after year taking this very narrow view of what they are asked to do here. It is not a very large sum which is involved and it would be for the good of the country to do it. It would be fair to the Co-operative movement. We shall go into the Division Lobby to support the new Clause, because it is a step to encourage thrift and is democracy in practice.

5.15 p.m.

Mr. Geoffrey Hirst: I do not intend to detain the Committee for more than a few seconds. I rise to ask my hon. Friend only one question because I was a little astounded by the figure of £40 million which he gave. I feel that my hon. Friends and I are unconsciously rather responsible for that because of the wording of Clause 73 where we use the words:
…shall be disregarded for all the purposes of the Income Tax Acts…

I think that I can carry my hon. Friends with me in saying that what we had in mind was that the concession for which we asked should be precisely on the same basis as that existing in the case of the Post Office Savings Bank and the trustee savings banks, for Income Tax only. I should therefore be glad if my hon. Friend could answer that question or at least give some indication of what the difference is because it is rather misleading—although it is our fault—on the matter of the estimate of cost.

Mr. Barber: I am afraid, as I told my hon. Friend a moment ago, that the cost of the new Clause would be £40 million. I am also afraid that I do not know offhand by how much that amount would be reduced if it did not apply to Surtax. However, I will certainly find out and let him know, and also my hon. Friend the Member for Twickenham (Mr. Gresham Cooke).

Question put, That the Clause be read a Second time:—

The Committee divided: Ayes 178. Noes 252.

Division No. 113.]
AYES
[5.16 p.m.


Abse, Leo
Edelman, Maurice
Jones, Jack (Rotherham)


Ainsley, William
Edwards, Rt. Hon. Ness (Caerphilly)
Kelley, Richard


Albu, Austen
Edwards, Robert (Bilston)
Kenyon, Clifford


Allaun, Frank (Salford, E.)
Evans Albert
Key, Rt. Hon. C. W.


Awbery, Stan
Fitch, Alan
King, Dr. Horace


Bacon, Miss Alice
Foot, Dingle
Ledger, Ron


Baxter, William (Stirlingshire, W.)
Forman, J. C.
Lee, Frederick (Newton)


Beaney, Alan
Fraser, Thomas (Hamilton)
Logan, David


Bellenger, Rt. Hon. F. J.
Gaitskell, Rt. Hon. Hugh
Loughlin, Charles


Bonn, Hn. A, Wedgwood (Brist'I, S.E.)
George, Lady Megan Lloyd
Mabon, Dr. J. Dickson


Benson, Sir George
Ginsburg, David
McCann, John


Blyton, William
Gordon-Walker, Rt. Hon. P. C.
MacColl, James


Boardman, H.
Greenwood, Anthony
McInnes, James


Bowden, Herbert W. (Leics, S.W.)
Grey, Charles
McKay, John (Wallsend)


Bowles, Frank
Griffiths, David (Rother Valley)
Mahon, Simon


Boyden, James
Griffiths, Rt. Hon. James (Llanelly)
Mallalieu, E. L. (Brigg)


Braddock, Mrs. E. M.
Grimond, J.
Manuel, A. C.


Brockway, A. Fenner
Gunter, Ray
Mapp, Charles


Butler, Herbert (Hackney, C.)
Hamilton, William (West Fife)
Marsh, Richard


Butler, Mrs. Joyce (Wood Green)
Hannan, William
Mayhew, Christopher


Callaghan, James
Hart, Mrs. Judith
Mellish, R. J.


Chapman, Donald
Hayman, E. H.
Mendelson, J. J.


Chetwynd, George
Healey, Denis
Millan, Bruce


Cliffe, Michael
Herbison, Miss Margaret
Mitchison, G. R.


Corbet, Mrs. Freda
Hill, J. (Midlothian)
Monslow, Walter


Craddock, George (Bradford, S.)
Hilton, A. V.
Morris, John


Cronin, John
Holman, Percy
Mort, D. L.


Cullen, Mrs. Alice
Holt, Arthur
Moyle, Arthur


Darling, George
Houghton, Douglas
Noel-Baker, Francis (Swindon)


Davies, Rt. Hn. Clement (Montgomery)
Hoy, James H.
Oliver, G. H.


Davies, Harold (Leek)
Hughes, Cledwyn (Anglesey)
Oram, A. E.


Davies, Ifor (Gower)
Hughes, Emrys (S. Ayrshire)
Oswald, Thomas


Davies, S. O. (Merthyr)
Hughes, Hector (Aberdeen, N.)
Owen, Will


Deer, George
Irvine, A. J. (Edge Hill)
Padley, W. E.


Delargy, Hugh
Irving, Sydney (Dartford)
Pannell, Charles (Leeds, W.)


Dempsey, James
Janner, Barnett
Parkin, B. T. (Paddington, N.)


Diamond, John
Jay, Rt. Hon. Douglas
Pavitt, Laurence


Dodds, Norman
Jeger, George
Pearson, Arthur (Pontypridd)


Dugdale, Rt. Hon. John
Jenkins, Roy (Stechford)
Peart, Frederick


Ede, Rt. Hon. Chuter
Johnson, Carol (Lewisham, S.)
Pentland, Norman




Popplewell, Ernest
Slater, Mrs. Harriet (Stoke, N.)
Thorpe, Jeremy


Prentice, R. E.
Slater, Joseph (Sedgefield)
Timmons, John


Price, J. T. (Westhoughton)
Small, William
Tomney, Frank


Probert, Arthur
Smith, Ellis (Stoke, S.)
Wade, Donald


Proctor, W. T.
Sorensen, R, W.
Warbey, William


Pursey, Cmdr. Harry
Soskice, Rt. Hon. Sir Frank
Watkins, Tudor


Randall, Harry
Steele, Thomas
Wells, Percy (Faversham)


Rankin, John
Stewart, Michael (Fulham)
Wheeldon, W. E.


Redhead, E. C.
Stonehouse, John
White, Mrs. Eirene


Reid, William
Stones, William
Willey, Frederick


Reynolds, C. W.
Strauss, Rt. Hn. G. R. (Vauxhall)
Williams, D. J. (Neath)


Roberts, Albert (Normanton)
Stross, Dr. Barnett (Stoke-on-Trent, C.)
Willis, E. G. (Edinburgh, E.)


Roberts, Goronwy (Caernarvon)
Summerskill, Dr. Rt. Hon. Edith
Wilson, Rt. Hon. Harold (Huyton)


Robinson, Kenneth (St. Pancras, N.)
Swingler, Stephen
Winterbottom, R. E.


Ross, William
Sylvester, George
Woodburn, Rt. Hon. A.


Royle, Charles (Salford, West)
Symonds, J. B.
Woof, Robert


Shinwell, Rt. Hon. E.
Taylor, Bernard (Mansfield)
Yates, Victor (Ladywood)


Silverman, Julius (Aston)
Taylor, John (West Lothian)
Zilliacus, K.


Silverman, Sydney (Nelson)
Thompson, Dr. Alan (Dunfermline)



Skeffington, Arthur
Thomson, C. M. (Dundee, E.)
TELLERS FOR THE AYES:




 Mr. Rogers and Mr. Lawson.




NOES


Agnew, Sir Peter
Donaldson, Cmdr. C. E. M.
Johnson, Dr. Donald (Carlisle)


Aitken, W. T.
Drayson, G. B.
Johnson, Eric (Blackley)


Allan, Robert (Paddington, s.)
du Cann, Edward
Johnson Smith, Geoffrey


Alport, Rt. Hon. C. J. M.
Duncan, Sir James
Joseph, Sir Keith


Amory, Rt. Hn. D. Heathcoat (Tiv'tn)
Duthie, Sir William
Kerans, Cdr. J. S.


Ashton, Sir Hubert
Eden, John
Kerby, Capt, Henry


Atkins, Humphrey
Elliott, R. W.
Kerr, Sir Hamilton


Barber, Anthony
Emery, Peter
Kimball, Marcus


Barlow, Sir John
Emmet, Hon. Mrs. Evelyn
Kirk, Peter


Barter, John
Errington, Sir Eric
Lagden, Godfrey


Batsford, Brian
Farey-Jones, F. W.
Lambton, Viscount


Baxter, Sir Beverley (Southgate)
Farr, John
Lancaster, Col. C. G.


Beamish, Col. Tufton
Fell, Anthony
Leather, E. H. C.


Bell, Ronald (S. Bucks.)
Fisher, Nigel
Leavey, J. A.


Bennett, F. M. (Torquay)
Fletcher-Cooke, Charles
Legge-Bourke, Maj. Sir Harry


Bennett, Dr. Reginald (Gos &amp; Fhm)
Fraser, Ian (Plymouth, Sutton)
Lewis, Kenneth (Rutland)


Berkeley, Humphry
Freeth, Denzil
Lilley, F. J. P.


Bidgood, John C.
Gammans, Lady
Lindsay, Martin


Biggs-Davison, John
Gardner, Edward
Linstead, Sir Hugh


Birch, Rt. Hon. Nigel
George, J. C. (Pollok)
Litchfield, Capt. John


Bishop, F. P.
Glover, Sir Douglas
Longbottom, Charles


Bossom, Clive
Glyn, Sir Richard (Dorset, N.)
Longden, Gilbert


Box, Donald
Goodhart, Philip
Loveys, Walter H.


Boyd-Carpenter, Rt. Hon. John
Goodhew, Victor
Low, Rt. Hon. Sir Toby


Boyle, Sir Edward
Gower, Raymond
Lucas, Sir Jocelyn (Portsmouth, S.)


Braine, Bernard
Grant, Rt. Hon. William (Woodside)
Lucas-Tooth, Sir Hugh


Brewis, John
Grant-Ferris, Wg Cdr. R. (Nantwich)
McAdden, Stephen


Bromley-Davenport, Lt.-Col. W. H.
Green, Alan
McLaren, Martin


Brooke, Rt. Hon. Henry
Gresham Cooke, R.
McLaughlin, Mrs. Patricia


Brooman-White, R.
Grosvenor, Lt.-Col. R. G.
Maclean, Sir Fitzroy (Bute &amp; N. Ayrs.)


Browne, Percy (Torrington)
Hall, John (Wycombe)
MacLeod, John (Ross &amp; Cromarty)


Bryan, Paul
Hamilton, Michael (Wellingborough)
McMaster, Stanley R.


Bullard, Denys
Hare, Rt. Hon. John
Macpherson, Niall (Dumfries)


Bullus, Wing Commander Eric
Harris, Frederic (Croydon, N.W.)
Maddan, Martin


Burden, F. A.
Harris, Reader (Heston)
Maginnis, John E


Butcher, Sir Herbert
Harrison, Brian (Maldon)
Maitland, Cdr. Sir John


Campbell, Sir David (Belfast, S.)
Harrison, Col. J. H. (Eye)
Markham, Major Sir Frank


Campbell, Gordon (Moray &amp; Nairn)
Harvey, Sir Arthur Vere (Macclesf'd)
Marples, Rt. Hon. Ernest


Carr, Compton (Barons Court)
Harvie Anderson, Miss
Marshall, Douglas


Cary, Sir Robert
Henderson, John (Cathcart)
Marten, Neil


Chataway, Christopher
Hendry, Forbes
Matthews, Gordon (Meriden)


Chichester-Clark, R.
Hiley, Joseph
Maudling, Rt. Hon. Reginald


Clark, William (Nottingham, S.)
Hill, Mrs. Eveline (Wythenshawe)
Mawby, Ray


Cooke, Robert
Hill, J. E. B. (S. Norfolk)
Maydon, Lt.-Cmdr. S. L. C.


Cooper, A. E.
Hinchingbrooke, Viscount
Montgomery, Fergus


Cooper-Key, Sir Neill
Hirst, Geoffrey
Morgan, William


Bordeaux, Lt.-Col. J. K.
Holland, Philip
Mott Radclyffe, Sir Charles


Cordle, John
Hope, Rt. Hon. Lord John
Nabarro, Gerald


Corfield, F. V.
Hopkins, Alan
Neave, Airey


Costain, A. P.
Hornby, R. P.
Noble, Michael


Coulson, J. M.
Hornsby-Smith, Rt. Hon. Patricia
Nugent, Sir Richard


Courtney, Cdr. Anthony
Howard, Gerald (Cambridgeshire)
Oakshott, Sir Hendrie


Craddock, Sir Beresford
Howard, John (Southampton, Test)
Orr-Ewing, C. Ian


Critchley, Julian
Hughes Hallett, Vice-Admiral John
Osborn, John (Hallam)


Crosthwaite-Eyre, Col. O. E.
Hughes-Young, Michael
Osborne, Cyril (Louth)


Crowder, F. P.
Hutchison, Michael Clark
Page, A. J. (Harrow, West)


Cunningham, Knox
Iremonger, T. L.
Page, Graham


Curran, Charles
Irvine, Bryant Godman (Rye)
Panned, Norman (Kirkdale)


Currie, G. B. H.
Jackson, John
Pearson, Frank (Clitheroe)


d'Avigdor-Goldsmid, Sir Henry
James, David
Peel, John


Deedes. W. F.
Jenkins, Robert (Dulwich)
Percival, Ian


de Ferranti, Basil
Jennings, J. C.
Peyton, John




Pickthorn, Sir Kenneth
Skeet, T. H. M.
van Straubenzee, W. R.


Pike, Miss Mervyn
Soames, Rt. Hon. Christopher
Vane, W. M. F.


Pilkington, Capt. Richard
Spearman, Sir Alexander
Vaughan-Morgan, Sir John


Pott, Percivall
Speir, Rupert
Vickers, Miss Joan


Powell, J. Enoch
Stanley, Hon. Richard
Wakefield, Edward (Derbyshire, W.)


Price, David (Eastleigh)
Stevens, Geoffrey
Ward, Dame Irene (Tynemouth)


Prior, J. M. L.
Stoddart-Scott, Col. Sir Malcolm
Watkinson, Rt. Hon. Harold


Prior-Palmer, Brig, sir Otho
Storey, Sir Samuel
Watts, James


Profumo, Rt. Hon. John
Studholme, Sir Henry
Whitelaw, William


Ramsden, James
Summers, Sir Spencer (Aylesbury)
Williams, Dudley (Exeter)


Rawlinson, Peter
Sumner, Donald (Orpington)
Williams, Paul (Sunderland, S.)


Redmayne, Rt. Hon. Martin
Talbot, John E.
Wills, Sir Gerald (Bridgwater)


Rees, Hugh
Teeling, William
Wilson, Geoffrey (Truro)


Renton, David
Thomas, Leslie (Canterbury)
Wise, A. R.


Ridley, Hon, Nicholas
Thomas, Peter (Conway)
Wolrige-Gordon, Patrick


Ridsdale, Julian
Thompson, Kenneth (Walton)
Wood, Rt. Hon. Richard


Robinson, Sir Roland (Blackpool, S.)
Thompson, Richard (Croydon, S.)
Woodhouse, C. M.


Robinson Brown, Sir William
Thornton-Kemsley, Sir Colin
Woodnutt, Mark


Roots, William
Tiley, Arthur (Bradford, W.)
Woollam, John


Sharples, Richard
Tilney, John (Wavertree)
Worsley, Marcus


Shaw, M.
Turner, Colin



Shepherd, William
Turton, Rt. Hon. R. H.
TELLERS FOR THE NOES:


Simon, Sir Jocelyn
Tweedsmuir, Lady
Mr. Finlay and Mr. Gibson-Watt.

New Clause.—(EXEMPTION FROM SCHEDULE A FOR OWNER-OCCUPIERS.)

(1) Where the total income of an individual includes or would but for this section, include any sum under Part III of the Income Tax Act, 1952, in respect of a house or tenement of which the said individual is both owner and occupier, the sum aforesaid shall, subject to the provisions of this section, be disregarded, for all the purposes of the Income Tax Acts other than the furnishing of information.

(2) No individual shall be exempted from assessment under Schedule A by virtue of this

section in respect of more than one tenement in any year of assessment.

(3) For the purposes of this section, a house owned by a married woman living with her husband and occupied by them shall be deemed to be owned and occupied by the husband.—[Mr. Naharro.]

Brought up, and read the First time.

Question put, That the Clause be read a Second time:—

The Committee divided: Ayes 17, Noes 233.

New Clause.—(PuacHASE TAX: REDUC TION OF RATE FROM 50 TO 37½ PER CENT.)

Subject to any order made by the Treasury under section twenty-one of the Finance Act, 1948, Part I of the Second Schedule to the Finance Act, 1958 (as amended by the Finance Act, 1959), shall be amended by the substitution in the percentage rates of tax specified throughout that Schedule, of the figure 37½ for 50.—[Mr. Nabarro.]

Brought up, and read the First time.

Mr. Nabarro: I beg to move, That the Clause be read a Second time.
No debates on the Committee stage of the Finance Bill could possibly be considered complete without an examination of the problem of Purchase Tax. Our debates on Schedule A were important, but they dealt with owner-occupiers and affected only about 40 per cent. of the population. This new Clause, in the names of the hon. Member for Birmingham, Northfield (Mr. Chapman) and

myself, directly affects the lives and the livelihood of 100 per cent. of the population. It is, therefore, a supremely important aspect of taxation to which, even at this stage, the Committee on the Finance Bill should give careful consideration.
This year, the Purchase Tax will raise £535 million. The figure has gone up steadily in the last few years. I am sorry that my right hon. Friend the Chancellor of the Exchequer is not here, as I shall be continuously referring to him and what I regard as his fiscal iniquities in the last two or three years. In 1958, the Purchase Tax collected a sum of £494 million. I agree with my hon. Friend the Member for—is it Yarmouth (Mr. Fell)?

Mr. Anthony Fell: No.

Mr. Bernard Braine: After ten years in the House, my


hon. Friend ought to know that I represent quite the most important constituency in the whole of the south-east of England: namely, Essex, South-East.

Mr. Nabarro: I am grateful to my hon. Friend. When I first knew him ten years ago, his constituency was Billericay.

Mr. Braine: The caravan has moved on.

Mr. Nabarro: In the absence of the Chancellor of the Exchequer, I hope that my hon. Friend the Economic Secretary will make a careful note of the figures I give. I should not like him to refer, as he does customarily, to the inaccuracies of his hon. Friend.
In 1958, the Purchase Tax collected a sum of £494 million. In 1959, it collected a sum of £498 million and in 1960, the year ending on 5th April last, it collected a sum of £501 million. The estimate for the year 1960–61 ending on 5th April, 1961, is £535 million. It is, therefore, a trifle inconsequential for the Chancellor of the Exchequer to boast to the House of Commons that in 1958 and 1959 he was responsible for reducing the Purchase Tax by an amount of £120 million. He did nothing of the sort. What he did was to reduce and rationalise the rates of Purchase Tax. That, however, is an academic, though important, consideration with which I will deal. The thing which is fundamental and of overwhelmingly greater importance is the aggregation of sums extracted from the taxpayers' pockets in this form of taxation.
In 1958, at the conclusion of my first 100 Parliamentary Questions that year on Purchase Tax, recognising a few of the anomalies to which I had alluded, the Chancellor decided to reduce the number of rates of Purchase Tax from seven to four. They had been 90 per cent., 60 per cent., 50 per cent., 30 per cent., 15 per cent., 10 per cent. and 5 per cent. The four rates, as you will remember, Mr. Williams, were 60 per cent., 30 per cent., 15 per cent. and 5 per cent. In 1959, the Chancellor kept the number of rates at four, but reduced the amount of each rate, from 60 per cent. to 50 per cent., from 30 per cent. to 25 per cent., from 15 per cent. to 12½ per cent. and the fourth he left stet at 5 per cent.—the rate in respect of certain articles of clothing and certain articles of furniture.
Last year, the Chancellor was very explicit in defining his attitude and policy towards Purchase Tax. They are an attitude and policy which show a marked distinction from the views of hon. Members opposite about Purchase Tax. As I understand it, the Labour Party's view of Purchase Tax is that there should be steep differentials between such classes of goods as they are pleased to call luxuries and such classes of goods as they are pleased to call semi-luxuries and, at the lowest end of the scale, non-luxuries or essentials which they believe should be relieved of Purchase Tax altogether. That has been their view expressed over the last few years.
I am delighted that my right hon. Friend has now come into the Chamber. The only passage of importance in my speech which he has missed was my reference to his fiscal iniquities.

Mr. Amory: That is nothing.

Mr. Nabarro: I agree.
I deliberately delayed quoting policy statements of my right hon. Friend until he returned to his place and I hope that the Committee will bear with me now for quoting extracts from the Chancellor's speech of 12th May, 1959, when he made quite clear the direction in which he wished to travel when considering this important item of taxation in future. He said:
As I think I indicated in a previous debate, there is a complete difference of view between right hon. and hon. Gentlemen opposite and myself about the pattern of the tax. They believe that articles which are necessities or even articles which enter widely into everyday use should be exempt, and luxuries, on the other hand, should be saddled with penal rates which, when they were in office, rose, I think, to 100 per cent. or more. My right hon. and hon. Friends and I think that the tax should be composed of certain moderate rates over a very wide range but not—I say to the hon. Member for Gloucester (Mr. Diamond)—a uniform rate. That is not our objective. We believe that such differentials as there are should be kept in perspective and not he unreasonable".
I pause to say that I do not think that my right hon. Friend has kept faith with the final passage of that policy statement:
…such differentials as there are should be kept in perspective and not be unreasonable.
This year, he is not following what he did in earlier years, because he is maintaining differentials of a ratio of ten to


one. For example, there is 50 per cent. Purchase Tax on gramophone records and 5 per cent. Purchase Tax on clothing, including luxury clothing and not only items of essential clothing. I claim that a differential of ten to one is much too big to give effect to the policy statement of last year from which I have just quoted.
5.45 p.m.
My second quotation from the Chancellor's speech is:
Why is this our view? First, a tax which must yield £400 or £500 a year"—
I think that there is a typographical error in HANSARD which has gone un-noticed; it must be, "which must yield £400 million or £500 million a year"—
I believe that that is what it must yield at present—must have a broad base. Secondly, if differences between one article and another are too great, the result will be that the tax will be riddled with fantastic anomalies.
I claim that the differences are still far too great and that the number of rates is still far too great. That led to my second century of Purchase Tax Questions last year and my third century this year. I am not saying that boastfully—[HON. MEMBERS: "Oh."]—no, I am being perfectly serious about this. I have put Questions to the Chancellor bringing out absurdities and I have the third century of Questions arranged in the form of a typescript for any hon. Member to see and they reveal endless absurdities. That is due to the wide range of differentials and the fact that there are still four rates. Again, the Chancellor is not keeping faith with his policy statement of last year.
My third quotation is:
We must remember, as my right hon. Friend the Paymaster-General said, that many of our high-quality products are of the very greatest importance to our export trade."—[OFFICIAL REPORT, 12th May, 1959; Vol. 605, c. 1192.]
I have concentrated today on the 50 per cent. rate of Purchase Tax, seeking a reduction to 37½ per cent. largely because of the Chancellor's final statement which I just quoted in connection with the export trade.
The 50 per cent. rate of tax raises £222 million. I hope that the Economic Secretary will again make a note of that figure. It was given to me by the Chan-

cellor in reply to a Question on 24th March. That £222 million from the 50 per cent. rate of tax comes out of a total yield of £501 million in Purchase Tax in the year ended 5th April, 1960. It will be seen, therefore, that the greater part of the Purchase Tax yield comes from the 50 per cent. rate, but it is that very 50 per cent. rate which covers those articles which form the bulk of our export effort among taxable articles in the Purchase Tax Schedules, notably motor cars.
I intend to speak at some length about motor cars because there are very mixed views about them.

Mr. Jack Jones: And badges.

Mr. Nabarro: I pay Purchase Tax at 25 per cent. on all of them. I do not see why the hon. Member should object. That is the proper rate and I also pay 50 per cent. Purchase Tax on the motor car, and that is excessive.
In case the hon. Member for Rotherham (Mr. Jack Jones) has not recognised it, this happens to be a very important matter, in the context of motor cars. Last year motor oars accounted for exports of 540 million, being 17 per cent., in value, of the whole of our nation's visible export trade. In 1938 they accounted for only 5 per cent. of the nation's visible export trade. That is the extent of the increase—from 5 per cent. to 17 per cent. But everybody connected with motor cars and engineering knows that it is imposible to go on exporting motor cars to all parts of the world, where there is the fiercest possible competition in markets, unless the manufacturer bases his output upon a large, healthy and growing home market.

Mr. Maurice Edelman: The hon. Member for Kidderminster (Mr. Nabarro) has said that everybody knows, and presumably accepts, that principle. That is not the case. In 1946 it was established by Sir Stafford Cripps that it was possible to have a large and expanding export market, which would prove the basis of the mass output in order to keep down the price of cars, without the need for a large home market.

Mr. Nabarro: I do not wish to liken the hon. Member to a Rip van Winkle,


but a lot of water has flowed under the bridge in fourteen years. To start with, in 1946 the Purchase Tax on motor cars was 100 per cent. Secondly, Britain had the whole motor car market of the world to herself, with no competition even from America. There was no German production, no French production, and no Italian production. The hon. Member is not engaged in engineering or, so far as I am aware, in selling manufactured goods abroad.

Mr. Braine: He writes fiction.

Mr. Nabarro: He writes very good fiction—"Who Goes Home".

Mr. Ellis Smith: Be fair; his constituency is involved.

Mr. Nabarro: I do not wish to be unfair. But my constituency makes all the floor coverings for motor cars.
The point is that today there is the fiercest competition overseas in the sale of all British manufactured goods, and, according to the Society of Motor Manufacturers and Traders, which is representative of the whole British motor car industry and, generally speaking, receives the support of the appropriate trades unions, it is a fundamental that until and unless the Purchase Tax rate on the home market sales of British motor cars is lightened it will not be possible for Britain to match the rate of expansion which has been manifested by Western Germany, France and Italy in the course of the last few years.
Western Germany is now a long way ahead of us in the sale of motor cars abroad.

Mr. Ellis Smith: Why?

Mr. Nabarro: There is a variety of factors. I am not saying that it is only domestic taxation, but the S.M.M.T. is undoubtedly right in saying that it is largely due to domestic taxation. I have the figures. I hope that the Committee will ponder them, because they are of immense importance. In 1954, Great Britain produced 769,000 motor cars; in 1959 we produced 1,160,000. That is an increase of 51 per cent. in five years. In Western Germany, production in 1954 was 561,000, and in 1959 it was 1,440,000. It had increased by 157 per cent. I repeat that last year—and the gap is

bigger this year, on the latest available figures—the West Germans produced 1,440,000 motor cars against Britain's 1,160,000. In other words, we are about 20 per cent. behind the West Germans now, whereas five years ago we were about 40 per cent. ahead of them.
I will not weary the Committee by giving the other figures of production for France and Italy, but they show the same general trend. I will come to the much more important point which the Chancellor recognised in his speech last year, namely, the vital matter of exports. In 1954 the United Kingdom exported 374.000 motor cars, and in 1959 we exported 550,000—an increase of just 47 per cent. Western Germany exported 247,000 motor cars in 1954 and 720,000 in 1959—an increase of 191 per cent. Last year the West Germans exported 720,000 motor cars against our 550,000. That means that she exported roughly 30 per cent. more than did Britain.

Mr. F. J. Bellenger: What was the value involved?

Mr. Nabarro: I do not think that the value is of critical importance, and I do not want to give too many figures. The value of a Volkswagen, sold in Africa, for instance, is not far removed from the value of a Morris Minor sold in Africa. and the value of a Mercedes-Benz, 220 Model, sold in South America. is not far removed from the value of a Rover sold in South America. The point is that the Germans are far ahead in motor car production today, and the gap is widening.
I do not wish my own views as an industrialist and businessman to be taken by themselves in this matter. Let us have regard to what is said by the paramount industrial organisation responsible for motor cars in this country. It said, in its representations to the Chancellor, after he had spoken about the export trade last year:
The Motor Industry is faced with a further long period of rapid growth in world demand for cars. Competition will increase in severity, and the United Kingdom motor industry cannot hope to be successful under its present cost disadvantages. If the disability caused by the inequality of tax burden is removed, however, the Motor Industry will be able the better to meet overseas competition and in particular it will be able to win its way back into the vital European markets.
I stress the words "win its way back." That was the choice of words used by


a deputation from the Society of Motor Manufacturers and Traders after it had met the Chancellor a few months ago and put all these points to him. The S.M.M.T. then made a request that there should be a substantial reduction from 50 per cent. to not more than 35 per cent. in the present rate of Purchase Tax on cars in the 1960 Budget.
Why is our motor car industry so concerned about the inequalities to which I have drawn attention? It is because in Britain the consumer has to pay 50 per cent. domestic taxation on the wholesale price of a car. In France, the equivalent domestic taxation is 24 per cent. In Italy the equivalent domestic tax is 9 per cent. and in the case of our principal competitors, the West Germans, the rate of domestic tax is 12 per cent.

6.0 p.m.

Mr. Ellis Smith: And we won the war.

Mr. Nabarro: And we won the war—I am grateful to the hon. Gentleman.
In Britain, on an article which is responsible for £540 million worth of our exports—17 per cent. of our visible exports—we are imposing a level of domestic taxation four times as big—50 per cent. compared with 12 per cent.—as that imposed by our principal competitors, the West Germans. In my view that is an intolerable state of affairs.

Mr. Bellenger: These serious figures which the hon. Gentleman is giving to the Committee throw a lurid light on the great differentiation between foreign taxation and our own. But is he comparing like with like? He has referred to the Purchase Tax in this country in relation to cars. With what sort of tax in Germany is he comparing it? Has he taken into account the turnover tax?

Mr. Nabarro: I do not wish to go too far away from the terms of the Clause, but German domestic taxation is based on a turnover tax at source. It grosses at 12 per cent. after adjustment in order to bring it precisely into comparison with the British system of Purchase Tax, and that is four times as big after this adjustment.

Mr. J. T. Price: That is only one part of the argument. The

hon. Gentleman is referring to the impact of Purchase Tax on the motor car industry. He must take into account other very serious factors. One is that about 75 per cent. of the motor vehicles sold in this country are chargeable wholly or partly to business accounts and carry with them a very heavy remission of taxation in relation to Schedule E assessments. When considering this matter we should not forget that, although the gross value of Purchase Tax may well be 50 per cent., a good deal of that tax is not paid by the purchaser. Initial allowances and other things reduce the actual tax paid by the purchaser. It makes the case a lot better from the point of view of the Chancellor's argument and worse from the point of view of the hon. Member's argument.

Mr. Nabarro: I am grateful to the hon. Gentleman. I feel that on this occasion I must decline to reply to the valuable point which he makes. I think I should be completely out of order in discussing Income Tax and capital allowances in connection with a Clause dealing with Purchase Tax. There is a certain amount of substance in what the hon. Gentleman says, but there is a relationship between the two systems of taxation. It does not derogate in any way from the fundamentals of how we are to enlarge our export trade in consonance with the recommendations made last year by the Chancellor.
I do not want to devote the whole of my case today to motor cars. There are four other categories of goods similarly heavily penalised by the 50 per cent. rate.

Mr. G. W. Reynolds: The hon. Member for Kidderminster (Mr. Nabarro) has given the Committee a mass of figures—he reeled them off very quickly; I hope they are all correct—which prove how poor has been the development of the motor car industry in this country during the last few years compared with our foreign competitors. This was something which we on this side of the Committee maintained before the General Election and it was denied by the party opposite. I am glad that now it is being confirmed.
I sympathise with the case being presented by the hon. Gentleman but, apart from a direct quotation from the


Society of Motor Manufacturers and Traders, he has not yet in any way proved lo me how the reduction of the rate of Purchase Tax on motor cars will make it easier for people in this country to purchase motor cars when, presumably, the manufacturers are unable to manufacture a great many more than they are producing at the moment. How will this increase the number of cars available for export? Can the hon. Gentleman go further and explain that to us?

Mr. Nabarro: I will reply as shortly as I can.
The price of a motor car, other than the raw material content, depends in large measure on the unit cost placed on the through-put of the works concerned. It is large-scale production, assembly lines and the remainder, and the larger the market, notably the domestic market on which the production of the factory is based, the lower the unit cost of production. That is the first argument—and I believe a correct one—for large-scale and rapid production. In this country we have, in the last few years, by an excessive rate of Purchase Tax on cars, damped down the home demand. I believe that has raised the cost and made us less competitive in the world market than otherwise we might have been.

Mr. Reynolds: I am sorry to interrupt the hon. Gentleman again, but I want to get this right. Theoretically I accept the argument which he is putting forward—theoretically. In practice, if one wanted any of the popular makes of cars one would have to wait five or six months. As I understand it, the motor car industry, with considerable assistance from public funds, is at present planning to extend its factories, but it will be two or three years before those factories come into operation. I still cannot see how a reduction in the rate of Purchase Tax on motor cars from 50 per cent. to 37½ per cent. this year would increase the number available. Presumably, the manufacturers are trying to produce as many cars as they can because they do not wish the customers to have to wait for them, but how will a reduction in Purchase Tax increase exports during the next twelve months?

Mr. Frederic Harris: Before my hon. Friend replies,

may I remind the Committee that since the duty was removed from commercial vehicles the export of those vehicles has increased by about 15 per cent. in one year?

Mr. Nabarro: My hon. Friend the Member for Croydon, North-West (Mr. Harris) has made a point which I intended to make later.—[Interruption.] I do not mind him making the point, but after all, I did battle in this Committee for five years to get the Purchase Tax removed from commercial vehicles and so I am aware of the situation since the tax was removed. The export sales have gone up enormously, but I must leave that point.
I gave way twice to the hon. Member for Islington, North (Mr. Reynolds) and he took full advantage of that. Whether he is convinced by my argument or not, I can only ask him to read the perfectly factual statements, supported by a mass of statistics, submitted by the Society of Motor Manufacturers and Traders—which represents all the car producers in this country—in close alliance with the appropriate trade unions which draw attention to the dreadful effect on overseas sales of the penal level of Purchase Tax on cars.
May I now turn to the other four categories of goods which fall within the 50 per cent. rate of Purchase Tax. First, there is radio; second, television; third, cosmetics and toilet preparations, and fourth, gramophone records. There are five categories in all—motor cars, radio, television, gramophone records and cosmetics and toilet preparations. I have dealt with motor cars and I wish to deal briefly with the other four.
Is radio a luxury to be taxed at ten times the rate of, for example, furniture or clothes—ten times—50 per cent. compared with 5 per cent.? Why should radio, which after all is an electrical appliance, be taxed at double the rate of other electrical appliances such as electric irons and carpet sweepers?

Mr. John Hall: It is a masochistic streak in the British character.

Mr. Nabarro: Yes, a masochistic streak in the British character. My hon. Friend is a fine advertisement for his furniture manufacturing constituency of Wycombe. He gets away with a 5 per cent. Purchase Tax on furniture—

Mr. John Hall: Perhaps that is due to more subtle advocacy.

Mr. Nabarro: I should not have thought that. He gets away with 5 per cent. on furniture compared with 50 per cent. on radio. The tax on radio is ten times the amount on furniture, and that amount of tax is twice as much as the Purchase Tax contributed by any other electrical appliance. I wonder why.

Mr. Braine: Utterly illogical.

Mr. Nabarro: It is utterly illogical. I have asked the Treasury this question several times in the course of my Purchase Tax Questions and the reply has been, "My right hon. Friend cannot anticipate his Budget statement." When we get to the Budget and have the debate, the Whips sit glowering at me and wanting me to get on with my speech and not raise these matters, but today they are going to be raised.
I have no doubt that the Economic Secretary will fall bank on England's last hope and say that, for revenue reasons, we must tax radio at 50 per cent., which is twice as much as the tax on any other electrical appliance and ten times as much as the tax on furniture, notwithstanding the fact that the cabinet of a radio set is furniture. If the Treasury were fair, it would tax the cabinet at 5 per cent. and the innards at 25 per cent. Those who have transistor sets would have a rate of Purchase Tax very much lower than 50 per cent. My hon. Friend the Member for Essex, South-East (Mr. Braine) was perfectly right in saying that it is utterly illogical.
The third category is television. I shall not weary the Committee with a lot of figures. Suffice it to say that exports of British television sets are negligible. We export hardly any television sets at all, but the Germans export them.

Mr. Raymond Gower: My hon. Friend is on the wrong lines.

Mr. Nabarro: If my hon. Friend the Member for Barry (Mr. Gower) is so knowledgeable on television matters, he might perhaps allow me to continue and to say that the Germans overwhelmingly concentrate on the production of a 21-inch screen while the British overwhelmingly concentrate on the production of a 17-inch screen. The difference

in Britain between a 17-inch and a 21-inch television screen is very substantial, as anyone who has compared prices will know. Those sales on the home market of 21-inch television sets do not justify laying down production lines to attract export sales, and Germany has the European market very much to herself.
The hon. Member for Islington, North is shaking his head vigorously. I shall never convince him for he is dogmatic and bigoted in these matters. Let him go away after this debate and this time consult not the Society of Motor Manufacturers and Traders, but the appropriate trade organisations ofthetelevision industry, for again they have made representations to the Treasury.
That deals with motor cars at 50 per cent., radio at 50 per cent., and television at 50 per cent. I shall now say a few words about the typist's lipstick. The hon. Member for Gloucestershire, West (Mr. Loughlin) seems indignant that I should talk about it.

Mr. Charles Loughlin: On the contrary, I think that lipstick would improve the hon. Member for Kidderminster (Mr. Nabarro).

Mr. Nabarro: Be that as it may, that did not strike me as a very subtle riposte, but the hon. Member is notorious for his use of a blunt weapon. The hon. Member's ignorance of Purchase Tax Schedules is manifest.

Mr. Loughlin: Have a shave.

Mr. Nabarro: Razors and razor blades are taxed at 25 per cent., not 50 per cent., and it would be out of order to talk about shaving when discussing this Clause.
Perhaps I might get back to the fourth category, cosmetics. The cosmetics industry of this country is quite a large one. It is doing very well and covers a lot of exports, but they labour under another subtle disability. One cannot sell cosmetics and toilet preparations abroad unless they are highly attractively packaged. That, of course, is one of the strengths of the French and the German export trade in these commodities. [Interruption.] Does my hon. Friend the Member for Barry wish to say something?

Mr. Gower: indicated dissent.

6.15 p.m.

Mr. Nabarro: The fact is not generally known that not only do we apply Purchase Tax at 50 per cent. to cosmetics, but we apply it to the expensive packages as well. We thereby create a situation—the Economic Secretary should write hard, for he or his predessor admitted this—in which the 50 per cent. rate is applied to the bottles, the aerosols, the cardboard boxes and all the attractive frills and fittings which go into the presentation of these articles. That is highly derogatory to our export trade and it is a disability under which neither the Germans nor the French suffer.
I now come to the fifth category. There is probably more intensity of feeling, although the front is narrow, on this than on any of the other four. This category is gramophone records. In 1940, when Sir Kingsley Wood brought into this House the Purchase Tax for the first time—twenty years ago—he called it a wartime impost and presented it to the House as a means of so inflating the price of consumer goods as to dissuade consumption and cause diversion of essential raw materials and labour to war factories. That was a very laudable purpose. I doubt whether the few hon. Members in this Committee to-day who listened to Sir Kingsley Wood twenty years ago—the right hon. Member for South Shields (Mr. Ede), the right hon. and learned Member for Montgomery (Mr. C. Davies), my hon. Friend the Member for Rugby (Mr. Wise), who then represented Smethwick, and one or two more—

Mr. E. Shinwell: One or two more.

Mr. Nabarro: This is the first time I have seen the right hon. Member for Easington (Mr. Shinwell) hiding his light under a bushel. I did not notice him before. Yes, the right hon. Member for Easington and one or two more. I doubt whether they thought that twenty years later we would still be in the throes of this dreadful iniquity of Purchase Tax.
Sir Kingsley Wood first put Purchase Tax on books. Notwithstanding the fact that it was only a few weeks after Dunkirk, the House of Commons still found time to protest in the strongest terms about a tax of that kind being placed on

culture. Subsequently, Sir Kingsley Wood thought again and removed Purchase Tax from books, but he kept it on gramophone records at 30 per cent. From there it crept up to 60 per cent. and today it is 50 per cent. Purchase Tax on gramophone records is still 50 per cent. notwithstanding the fact that on musical instruments—with the exception of pianos, which are not taxed at all—it is 25 per cent. The tax on gramophone records is double that rate.
Surely that is a tax most largely on culture. Of course, there are "pop" records. We know all about that, but there is also pornographic literature. If. in 1940, the argument could be sustained by the Labour Party, warmly supported by the Conservative and Liberal Parties. that we should not tax books because, overwhelmingly, they make a contribution to culture and in a minority sense only do they represent rubbish, surely the same argument could be applied today to gramophone records, most largely representing a cultural product and in a minority sense only representing "pop". rubbish and trash.
The hon. Member for Walthamstow, West (Mr. Redhead) is shaking his head in dissent. It is his party which has supported me in this field more than my own party, and I have no doubt that many of his hon. Friends will rise to support me today on the issue of gramophone records. It is an absolute illogicality that the gramophone record should be singled out and taxed at double the rate of musical instruments, especially having regard to the fact that we have always recognised that books should not be taxed at all.
Those are the five categories—motor cars, at 50 per cent. Purchase Tax, which is gravely affecting our competitiveness against West Germany, Italy and France; television, the exports of which are nearly negligible from this country whereas West German exports are largely going ahead, and I believe, again, that that is due to this excessive rate of Purchase Tax; radio, where it is utterly illogical that the 50 per cent. rate should be maintained when the furniture of the cabinet is taxed at only 5 per cent. and the "innards" of the radio are being taxed at twice the rate of the tax on an electrical instrument; cosmetics, in which case the packages needed, particularly in the export trade, are of an


expensive character and are also subject to tax; and gramophone records, where it is a direct tax on culture.
May I wind up with this single sentence to the Chancellor? I am sorry that this amuses my hon. Friend the Member for Barry. If I have spoken for too long, I apologise to him. After all, I am making a case on behalf of hundreds of thousands of workers in these industries. Whether they vote Labour or Tory is not of much consequence to me. They are behind me to a man in this campaign, because the tax strikes at their employment. I am interested to see that the hon. Member for Coventry, North (Mr. Edelman), who represents a motor car division, disagrees with me, because the opinion which he implies by his disagreement is not the opinion which I get when I go to Coventry.

Mr. Ellis Smith: In my view, the hon. Member for Kidderminster (Mr. Nabarro) has made a reasoned case and has quoted some very good statistical evidence to support it, but he has brought a number of my hon. Friends into the argument at different times, and it should, therefore, be stated and put on the record for historical purposes that the Labour Party was against Purchase Tax when it was introduced. We had several special party meetings during the war and we were uncompromisingly opposed to it. We reluctantly accepted it in the end, because we put the winning of the war before anything else. In our view, its main purpose at that time was to restrict consumption, and we believed that that should have been done in a more scientific manner.

Mr. Nabarro: I am grateful to the hon. Member. I am sure that he will wish to contribute to the debate later.

Mr. Ellis Smith: Much later—on another new Clause.

Mr. Nabarro: The hon. Member has a new Clause—Purchase tax: reduction of rate from 12½ to 5 per cent.—which seeks to reduce the rate of tax. The moment he talks about reducing the 12½ per cent. rate on pottery, I shall respond with a request for a reduction in the rate on carpets, because if the rate on pottery is to be reduced then the rate on carpets must be reduced. I did not mean to

make that point now; I make it only in passing.
I want to wind up on this note: the Chancellor's reply to the debate will be in traditional bones and terms. He will say, "The reduction of the 50 per cent. rate of Purchase Tax to 37½ per cent. which my hon. Friend is seeking to make would result in a fall in revenue of one quarter of the estimated Revenue of £222 million, a figure which I gave my hon. Friend in my reply to his Parliamentary Question on 24th March." My right hon. Friend the Chancellor will undoubtedly say, "A quarter of £222 million is £55½ million".

Mr. Herbert Butler: It is £55½ million, not £55 million.

Mr. Nabarro: That is what I said. I am sorry that I dropped my "h". My right hon. Friend will say, "The cost of accepting this Clause in the name of the hon. Member for Northfield and Kidderminster is £55½ million. The acceptance of a Clause at such a high cost would be inconsonant with the economic pattern and philosophy enunciated in the last Budget statement".
Let me shoot my right hon. Friend to pieces in advance. Every time he has reduced a Purchase Tax rate, the yield has gone up. If he accepted this new Clause, the yield of a 37½ per cent. rate of Purchase Tax would be higher than the notional yield of the 50 per cent. Purchase Tax, based on the experience of the last few years—and there was the same experience when the Chancellor reduced the price of beer by 2d. in the 1959 Budget. Everybody started guzzling bitter beer. The brewers have made record profits, the consumers have been appropriately lubricated and the yield for the coming year is estimated to be even higher than that for last year.
In 1958, the Chancellor collected £494 million in Purchase Tax. He reduced the rates. The next year he collected £498 million in Purchase Tax, notwithstanding the reduced rates. That was in 1959. In 1960, notwithstanding the reduced rates, he collected £501 million. Notwithstanding the reduced rates, this year, up to 5th April, 1961, he is to raise £535 million from Purchase Tax.
I therefore hope that we shall have no nonsense in his reply to the effect that he cannot afford to accept this new Clause because it would mean too much loss to the Revenue. On the contrary, if he reduces the Purchase Tax on these five categories—the motor car, radio, television, gramophone records, and cosmetics and toilet preparations—from 50 per cent. to 37½ per cent., the whole of the population will rejoice. They will consume more and the aggregation of the yield from a 37½ per cent. rate of tax will be greater than the notional yield from the 50 per cent. rate of tax.

6.30 p.m.

Mr. Donald Chapman: It is not very often that I find myself with my name to an Amendment or new Clause sponsored by the hon. Member for Kidderminster (Mr. Nabarro). I should like to say two things to him. In the first place, much as is the affection which many of us have for him and the speeches which he makes in Committee and in the House, I beg him to realise that if we all treated the House and the Committee with the same strident advocacy as he uses, we might reduce the House to a much worse place than it is now. I say to him in all friendliness that it would be a good thing if he took a tip from his hon. Friend the Member for Wycombe (Mr. John Hall) about subtle advocacy.
Secondly, I congratulate him on what was a considerable tour de force today. I am particularly glad to be supporting what he said, because it was so brilliantly put. If he realised the enormous effect which he can have when, as he did in parts of his speech, he puts his point quietly, effectively, even damnably straight, then he would be held in even higher esteem than that in which many of us hold him. He would do well to continue in that line in the House instead of the more strident advocacy which often irritates many of us. Nevertheless, he has left me with very little to say in support of the brilliant case which he has put over today.
The hon. Member will be the first to admit that what he said about motor cars is exactly what I said when I put this case on 8th April, 1959. That is one of the reasons why I am particularly glad to support him. Another reason why I shall be so glad to support him in the Division Lobby today, if need be, is that

I, too, am beginning to find in this Committee that unless we go in for some of the hon. Member's strident advocacy we get no change whatsoever, not even an answer to our arguments from the Treasury Bench.

Mr. Nabarro: Hear, hear.

Mr. Chapman: I want, in my own defence, to quote one passage from what I said last year, because it has gone another year without being answered. We are having to rehearse it all over again tonight. We shall be very surprised indeed if the Economic Secretary, contrary to what has been done by any of his right hon. Friends, makes even an attempt to answer it in economic terms. I said last year:
Over the last four years, while we have been raising home consumption of cars by about one-quarter or one-half of our 1954 figure, the home consumption of the three competitors which I have mentioned"—
they were France, Germany and Italy—
has gone up 65, 75 and 100 per cent. Their production is up 100 to 150 per cent., while our production has risen by one-quarter to one-half. Their exports are up 150, 200 or 250 per cent. while again ours have risen only by one-quarter or one-half of the 1954 figure".—[OFFICIAL REPORT, 8th April, 1959, Vol. 603, c. 319.]
That was the burden of my case last year. My bitter complaint is that neither then nor since, nor at any time in the last five years when we have been talking about the motor car industry in this Committee, have we ever had a proper analysis from the Treasury Bench of the factors facing the industry. I hope that today for the first time the Economic Secretary will give us that analysis.
I want to complete the picture painted by the hon. Member for Kidderminster. What he failed to add to his significant argument was that the frightening situation in the motor car industry is not in our global exporting position but in our exports to Europe. In Europe there is a potential car-owning population of considerable magnitude. It is calculated that in four or five years' time another half a million people in Europe will be buying cars every year.
In this market, which will expand in the next few years, we have been losing ground. We were exporting 120,000 motor cars to Europe. It fell to 90,000.


It has just crept back to 100,000. This has happened while all our competitors in Europe have been striding ahead on a scale which has to be seen to be believed.
It frightens me to see the position which we have now reached in Europe. As I said last year, four or five years ago France and Germany produced one-half or two-thirds of what we were producing. Italy was not anywhere in the market. Germany is now way out ahead of us. France will lick us this year, much to our shame, unless I am very much mistaken. From being a negligible competitor five years ago, Italy now produces and sells half as many cars as we do. This is happening in the market in which, above all, we must get going in the next few years.
Only yesterday I read in The Times and other newspapers that the position in the Canadian market is such that they may start putting higher import taxes on our motor cars. For some years it has been thought that the years of expansion in the North American market are coming to an end and that we shall do well to hold our position there.
The only other market is the British Commonwealth, particularly Australia and New Zealand. The prospects there are that we shall be in greater difficulty in years to come, because they are now producing their own motor cars. Again and again we come back to the potential market in Europe as the mainstay of our possible advance in this industry in the next few years.
I am desperately anxious that the Treasury should not face this issue with total unconcern. The Treasury seems to think, "The figures come out right every year based on the flourishing American market. What is there to worry about? We can postpone any economic argument and decision for another year". The situation in Europe is becoming worse and worse all the time. Once the tables turn in the other two markets, America and the Commonwealth, it will be almost too late to start capturing Europe. That is the position today, as neatly as I can put it.
I want to deal now with two or three points which the hon. Member for Kidderminster did not make. Why is it important that we should have higher production here in order to secure such

an economy in cost? One of the reasons is the cost of labour in Britain compared with that of our competitors in France, Germany and Italy. According to the index of wages for semi-skilled workers, on which the industry depends, and treating the United Kingdom as 100, semi-skilled wages in France are 83, in Italy they are 75, and in Germany they are 71.
There has to be an enormous headway in technological advance, scale of production. and so on, to compensate for a 25 per cent. disadvantage in wage costs. It is terribly important that we should realise that.

Mr. Denzil Freeth: Do the figures for our competitors include payments by employers to social services?

Mr. Chapman: As far as I know, they do. They are comparable figures. They are based on an Italian study which I cannot quote today, but it is a fair comparison. It is important to realise just how much the crisis is looming ahead and how much disadvantage we have to make up.
It is said by the Treasury that we shall lose Revenue by a tax concession. The Society of Motor Manufacturers and Traders Ltd. does its best to be impartial in these matters, as well as pleading its own case, because it has to stand up to careful criticism. It has estimated that if we could get taxation on motor cars down to about 35 per cent., while we might lose £40 million in Purchase Tax revenue the revenue from licences and fuel tax would completely compensate us for that loss. It is further estimated that if Purchase Tax could be got down even further—I am sure that the hon. Member for Kidderminster will be delighted with this argument—the revenue from fuel tax and licences would more than counterbalance the loss of Purchase Tax revenue.
On the narrow fiscal argument, I do not believe that, considering the effect of two or three years' expansion in the motor industry, the Treasury has a leg to stand on in terms of revenue.
Each year when we have made this case on the motor car industry we have pleaded that something more than fine words, congratulations, and complacent optimism should come from the Treasury Bench, but every year we have been


faced only with a blank refusal to do anything very much. Last year was the one exception. It was based on a general reduction of taxation. What we want to say to the Treasury Bench today is that it is now becoming so important to help the motor car industry in competitive markets that we cannot wait until another year of general reduction in taxation before relief is given in this field.
If one looks ahead, the prospects for 1961, based on today, are that we shall not be in for an easy Budget. The boom is only just getting under way, the curb has just started, and there are rumours of more curbs to come. Presumably, if the position does not right itself, they will come in the autumn. If they do, next April will be too early for a sudden lightening of the burden of taxation, based on present trends. That takes us to 1962 before there is any chance of any lightening of the burden of taxation.
If that should be the case, I say again to the Economic Secretary, "You cannot wait for another big reduction of general taxation before doing something to enable the motor car industry to continue to be competitive". It will not be good enough much longer to congratulate the industry, to talk about its £500 million of exports, to go to the dinner of the Society of Motor Manufacturers and Traders and congratulate its members all over again with honeyed words. The time may come when it will be too late to get back into Europe and when other markets become more difficult, and if the Treasury wait for a general reduction in taxation the whole situation will get out of hand.
I hope that the very good case put by the hon. Member for Kidderminster will be supported. If he wants to press his new Clause, I shall be very glad to support him in the Division Lobby unless we have overwhelmingly convincing economic arguments, for the first time in five years, from the Treasury Bench.

Mr. Denzil Freeth: I am very glad to follow the hon. Member for Birmingham, Northfield (Mr. Chapman), because I think that to a very large extent the arguments for reduction here must inevitably depend on the advocacy of the motor industry. It is unfortunate that we cannot debate the whole question of the

Common Market, because when one looks at the future of the motor industry—particularly in Europe, on which the hon. Gentleman laid a good deal of emphasis—what happens to the tariffs that face us and to the tariffs that do not face our competitors must be very important indeed.
When one comes to the proposition—which I think we all accept—that in producing mass-production consumer goods for export one must have a strong home market, one has to ask oneself whether or not the present level of Purchase Tax is a deterrent to that strong home market. Having read the information sent out by the Society of Motor Manufacturers and Traders, and having listened to the speech of my hon. Friend the Member for Kidderminster (Mr. Nabarro), I am unable to convince myself—as I think the hon. Member for Islington, North (Mr. Reynolds) by his question showed that he was not convinced—that Purchase Tax today is having an effect upon the home market that prevents that home market from being a healthy one.
Until a month or so ago, waiting lists of five or six months were not uncommon for popular models of cars and I therefore find myself unable to accept the proposition that the Government's level of taxation is preventing the motor manufacturers having a reasonably strong home market—

Mr. Chapman: I must apologise for not having dealt with this. When my hon. Friend the Member for Islington, North (Mr. Reynolds) made his remarks I passed him a note of explanation. I think that the answer is that a year ago there was no waiting list. If the present boom is followed by another credit squeeze, then, again, there will be no waiting list. Taking a period of years by and large, there is no rational justification at the moment for motor manufacturers to jack up their production to a much higher level, because there will be periods of no waiting lists and, in fact, periods of redundancy. If the Purchase Tax, which is a constant factor, were reduced, the case would be different.

6.45 p.m.

Mr. Freeth: I take that point, but there is another. Can we be certain that if sales at home are stimulated by a


reduction in tax we shall not find the home market drawing in too great a proportion of production, bearing in mind that, at present, any greater production of motor cars must also entail an import of sheet steel from which to make them? For that reason, I find it equally hard at present to accept an argument that Purchase Tax should be reduced.
There is a third reason. We have agreed that there is a danger of prices starting to rise again. There is a very grave danger of imports rising faster than exports. They are doing it already, and exports are not showing the same tendency to rise.
During an earlier stage of our proceedings, I said one or two rather cruel things about my right hon. Friend the Chancellor of the Exchequer in relation to bank advances. I said that I thought that bank advances to mid-May would rise. I am happy to say that I was proved wrong. Bank advances fell quite substantially—according to this morning's newspaper reports the increase in bank advances was only £3·1 million. I therefore have the triple pleasure of being wrong, finding that my right hon. Friend's measures are working better than I thought they would, and of apologising to him most sincerely.
The fact is, however, that bank advances are still rising, and are £655 million higher than they were a year ago. If one believes, as I do, that this policy is right, namely, that for balance of payments reasons one has to try to dam home demand, I cannot see how one can support a Clause that would further increase demand for the goods contained in this Schedule of Purchase Tax.

Mr. Edelman: The hon. Member for Kidderminster (Mr. Nabarro) had all my sympathy when he referred to the desirability of reducing Purchase Tax on gramophone records, but as he was obliged by the exigencies of the rules of order to include that reduction in an omnibus provision that included motor cars—to which he gave his major attention—I fear that I cannot support him.
My concern tonight is not with the memorandum of the Society of Motor Manufacturers and Traders which constituted the essence of the hon. Member's speech—in fact, I can say that I had the advantage of reading the hon.

Gentleman's speech before he made it—but with certain wide, non-parochial interests that go far beyond those of the motor manufacturers.
I am concerned with full employment in the motor industry and with the place of that industry in the nation's economy. That is why, although, in principle, quite obviously, like everyone else, I am in favour of a reduction of taxation, and of a reduction in Purchase Tax as soon as possible, I believe that the time has not arrived for a reduction of the Purchase Tax from 50 per cent. to 35 per cent.—[HON. MEMBERS: "37½ per cent."]—recommended for the motor industry by the hon. Member. It appears that he has added 2½ per cent. to the recommendation of the Society of Motor Manufacturers.
When I referred to Sir Stafford Cripps, the hon. Member said that much water has flowed under the bridges—or used some such cliché—since Sir Stafford dealt with the motor industry. Although that is so, the motor industry—and by that I mean the motor manufacturers—still preserves the same pattern of thought as it did in 1946.
The hon. Member may recall, and the Committee will certainly remember, that when, after the war, at a dinner of the Society of Motor Manufacturers and Traders, Sir Stafford Cripps recommended that the industry should henceforward concentrate on exports, and gave those present the target at which it should aim, he was literally howled down.
That grave act of discourtesy, at a dinner at which he was a guest, made a profound impression on all those who were present; not merely because of the discourtesy, but because it impressed on the minds of all present the argument advanced by Sir Stafford—

Mr. Gresham Cooke: I intervene just for the sake of historical record. I was not present at the dinner that year, although I was present at the following one, but from what I was told afterwards I understand that the shouting was done by the motor traders, who were dismayed by the thought of the lack of a home market for the sale of cars. I do not think that there was opposition from the responsible motor car manufacturers themselves.

Mr. Edelman: The hon. Member was not present and I was, so I can say, by looking back on that period, that what, in fact, happened was that the motor industry as represented at the dinner of the motor manufacturers and traders was antagonistic, I will not put it higher than that, to the recommendations made by Sir Stafford Cripps. I want to emphasise that that antagonism has found expression in the brief which I hold in my hand of the S.M.M.T. Its argument was that the British motor industry could not have a high export performance unless it had a long-scale run of production for the domestic market, and although, at that time, Sir Stafford Cripps was able to argue that the Swiss, as the principal exporters of watches, had only a small domestic market, that argument did not carry weight.
Eventually, the Labour Government were obliged to apply physical controls which were established primarily to deny to the motor manufacturers the supply of sheet steel if they were unwilling to apply themselves to the export market. I recall these historical facts merely because the pattern is reproducing itself today. Finally, the motor manufacturers were obliged, by the physical fact that they were not getting the steel unless they were prepared to go into the export market, to go into the export market, with results which were to the great benefit of the country as a whole.
I should like to pay tribute to those technicians, designers and workers in the industry who applied themselves to the task given them by the Government and who succeeded in raising the performance of production of the motor industry. Despite the gloomy prognostications of those days, the industry, putting the emphasis on exports, was able to become for a short period, at any rate, the chief exporter in the whole world. Although the motor manufacturers constantly said that there must be a large majority home market, where they could have their long lines of production, it was established that, irrespective of whether there was a predominating production for the home market over the export market, it was possible to have long lines of production which were able to cheapen the cost of the unit to which the hon. Member for Kidderminster referred.
I notice that in debates of this kind the arguments always advanced—and I

do not exclude my hon. Friend from this charge—in favour of the motor industry are the arguments put forward by the Society of Motor Manufacturers and Traders who, of course, have a special interest to defend and promote.

Mr. Nabarro: I quoted a few figures to give the ring of authtenticity in the matter of motor cars from the statement of the S.M.M.T. to the Chancellor because I thought that was the most authoritative reference. It is really untrue to say that I made my speech briefed by the society. Take what I said about the other four categories—radio, television,cosmetics and gramophone records. I was not briefed by anyone. I looked up the figures for myself.

Mr. Edelman: I can only say that the hon. Member's speech followed in close detail the memorandum of the S.M.M.T. which I hold in my hand. That is not to denigrate its quality.
I believe that the S.M.M.T. has put forward a case which has to be answered and that is what I seek to do tonight. The hon. Member for Kidderminster very properly pointed out the staggering increase in exports by the Germans and the French. Indeed, the figures are remarkable. Between 1954—if I may recall two of those figures—the Germans increased their exports by 191 per cent. and the French by 385 per cent. I do not want to draw too dramatic conclusions from the fact that the principal firms making cars in Germany and France were nationalised concerns, Renault in France, and Volkswagen in Germany.
I do not want to dwell too much on it, but there is a significance in the fact that there were two major nationalised industries in France and Germany engaged in the making of motor cars. They were producing the minimum of models and were able to produce those models with precisely those long lines of production to which the hon. Member referred as being essential to reduce the unit cost. If I may quote the memorandum of the S.M.M.T. to the Chancellor, the society says, talking about the inescapable fact that Continental producers have forged ahead in the home market:
On the basis of a large and growing home market they have been able to achieve high total production which, in turn, has brought a spread of fixed costs and a sizeable reduction in unit costs which has enabled them to undercut the British producer in export markets.


They were able to reduce the price of a unit by the simple fact that they kept the number of their models to a minimum, they had interchangeability of parts, and they were able, by means of this simplification and rationalisation, to produce long lines of vehicles at a relatively cheap cost.
Before the war—and the bon. Member for Kidderminster may recall it—there was great anxiety among the workers in the motor industry, who are my principal concern in this matter, because of the notorious pattern of seasonal employment and unemployment. Sometimes I am astonished that people should wonder why it is that, despite the fact that today the motor industry is booming, there is a malaise inside the motor industry which expresses itself in wildcat strikes, sporadic strikes and even authorised strikes.
The reason is that the motor workers have a profound psychological anxiety, dating from the years of seasonal unemployment before the war, when the motor manufacturers, profiting from perhaps an inflationary phase to the benefit of the home market, were taking the pickings out of the season and then turning their men off when the season's advantages had expired. That anxiety still exists. Because of it the workers in the industry are concerned that there should not be a return to that period. Therefore, I believe that the great necessity today is for the motor industry to use the home market not simply as an orchard where they can go picking the ripe fruit, but, if I may change the metaphor, as a buffer against the possibility of unemployment when the export market which should be maintained on a permanently high level may perhaps run into difficulties.

Mr. Chapman: I think that my hon. Friend is being a little unfair. I do not want to contradict him completely and whitewash the motor manufacturers, but there would be nothing easier for them to do than to starve the export market and flood the home market, with the waiting lists as they are today.

Mr. Edelman: The point that I am making is that Purchase Tax—and the hon. Member left it out of his list of reasons for the application of the tax to our fiscal arrangement—is a form of

fiscal control for shaping the pattern of the economy. I believe that today the motor manufacturers, were they suddenly to abandon the emphasis which they have traditionally been obliged to place on exports, would not only find it inconvenient and difficult, but would properly arouse the resentment of Members of all parties who would feel that the motor industry was not playing the national part which it should do and which it has hitherto done.
7.0 p.m.
I believe that there are great opportunities for the motor industry and that our own motor industry is capable of meeting the competition which exists from abroad, but to meet that competition I do not believe that it should be offered the soft feather-bed of tax remissions which would enable it to rely comfortably on the home market. Our motor industry has the talent and the technicians, but it has not the management which is necessary to reduce unit costs.
There is in the memorandum produced by the S.M.M.T. an item of considerable significance and even, I might say, of sinister significance. In a comparison of costs between Britain and her Continental competitors the memorandum refers to the fact that our material costs are competitive, but that the labour costs are not. I must say that I see a certain danger—which has been realised in the past—that the motor manufacturers, in order to try to find explanations for the fact that the unit cost of the British motor car is relatively high compared with that of our foreign competitors, will turn to wages as being the scapegoat for the failure of the British motor industry to achieve exports comparable with those of our foreign competitors who pay lower wages.
There are already certain dangers that in the new expansion of the motor industry there will be an attempt—which, I hope, will be defeated by strong trade union organisation—to make regional agreements for the payment of engineers which will be competitive with other districts and which will have the effect of menacing wage rates. But the fact that it is not primarily wages which are responsible for high unit costs can be shown from the example of the United States, where wages are relatively much higher, and yet, taking the assessment


per lb. of motor cars, the United States motor industry is highly competitive.
I oppose the proposed new Clause in the name, of the hon. Member for Kidderminster. Although, taking an easy and parochial view, it would be possible to support it and, indeed, it might demagogically be more popular to support it, believe that in the interests of the country as a whole, in the long-term interest of the motor industry and, above all, in the interests of the workers who are engaged in that industry, it would be wrong and undesirable at this moment—I emphasise "at this moment"—to reduce the rate of Purchase Tax.
There will always be time to reduce Purchase Tax if the motor industry should run into real difficulties abroad, but for the time being the home market can and should 'be the buffer which protects the interests of those engaged in the industry. For that reason I hope that the Chancellor will not yield to the demands of his hon. Friend for a remission of Purchase Tax for the motor industry.

Mr. Gresham Cooke: My hon. Friend the Member for Kidderminster (Mr. Nabarro) has given us a brilliant exposition of the needs and desires of the motor industry and, indeed, of everybody who wants to see a reduction in taxation. But as one who is closely connected with the motor industry, and who is pestered every few days for the delivery of cars which have been on order for the last three or four months, I must be honest and say that I would not ask the Chancellor for a reduction in Purchase Tax from 50 per cent. to 37½ per cent. at this time.
Having said that, I would say that the situation could change very quickly indeed. With hire-purchase and credit restrictions the situation may be very difficult in a few months' time. I would ask my hon. Friend the Economic Secretary to remind the Chancellor that he can alter Purchase Tax at any time in the course of the year. He does not have to wait for a Budget or a Finance Bill to do that.
There is a question that we must ask ourselves and which I should like the Treasury Bench to consider. The production of the motor industry has been hampered in the last few months, not by Purchase Tax, but by a shortage of com-

ponents. Most of the major firms could not build any more cars if they wanted to. What is the secret by which West Germany can rush her production up to 1,400,000 cars?
I wish to say two other things to the Economic Secretary on the subject of Purchase Tax. First, it can have very strange and serious effects in distorting our economy. Purchase Tax is 42 per cent. of the retail price of a new car. That means that all the way down the line second-hand cars cost 40 per cent. more than they should do. It means that there are marginal-use cars—lowcalibre cars—which, before the war, would have been taken off the road as unsafe, but which, today, still fetch a price and are used because their value is inflated by Purchase Tax on new cars. Therefore, Purchase Tax distorts the economy.
Secondly, there is a danger in keeping all these taxes too high for too long, just as Entertainments Duty was kept on for too long to the detriment of the cinema industry. To take a contracting industry such as the bicycle industry. Purchase Tax has been kept at too high a rate for too long and there is a case for taking it off the 'products of that industry. There may be a case with motor cars, cosmetics and, gramophone records for Purchase Tax to be reduced outside the Budget, but, like the hon. Member for Coventry, North (Mr. Edelman)—with whom I do not always agree—I think that it would be difficult to ask the Chancellor for a reduction in Purchase Tax on motor cars to 37½ per cent. at present, although the situation may change rapidly.

Mr. Victor Yates: I have been flabbergasted to hear the speech of the hon. Member for Twickenham (Mr. Gresham Cooke).

Mr. Nabarro: Hear, hear; a disgraceful speech.

Mr. Yates: It is suggested that we should not consider a reduction in Purchase Tax at the moment because there happens to be a waiting list. What does it matter if the waiting list is doubled or trebled? The important thing is to find out what is the capacity of the motor car industry and to gear that industry to the demand that is likely to be created.
I am staggered to hear what seems to me to be the quite illogical statement from an hon. Member who is associated with the industry that we keep these taxes on too long, and yet when he has an opportunity of doing something to bring about a reduction, he says, "Not now". Even if I am surprised at his speech, I am shocked by the speech made by my hon. Friend the Member for Coventry, North (Mr. Edelman).

Mr. Nabarro: I thought it was dreadful.

Mr. Yates: He must be well aware of the representations that have been made to hon. Members during the last few years from trade unionists and workers in the motor car industry about the high rate of Purchase Tax and its effect on employment. Does my hon. Friend suggest that the motor car industry should just be left in such a state that we must wait until a crisis arises before we act? That is quite wrong. Either the tax is right or it is wrong. I maintain that it is wrong.

Mr. Edelman: My hon. Friend has addressed himself very passionately to the subject, but I cannot help feeling that he does not follow the fluctuations of the motor industry as closely as he perhaps should. In fact, when representations were made for a reduction in the Purchase Tax there was a tendency for unemployment to rise in the motor industry. The whole burden of my argument is that it should be used as a buffer, and precisely on occasions when there is actual unemployment or the threat of unemployment the Chancellor of the Exchequer can take action to reduce Purchase Tax.

Mr. Yates: I fully understand my hon. Friend's remarks, but, in my judgment, he wants to use the Purchase Tax in a manner quite different from what was originally intended. He speaks of it being used as a buffer. Why should we have to wait until there is unemployment in Coventry, for instance, before action can be taken? That approach is quite wrong. Not only is Purchase Tax involved here but hire-purchase agreements also, and the terms under which they can be made affect the motor car industry.
We have too often approached the subject of Purchase Tax from the wrong

angle. I know that my right hon. Friend the Member for Battersea, North (Mr. Jay) has spoken in the past about motor cars as luxuries. I regard that as a lot of nonsense. I have never accepted the idea that the motor car is a luxury, however big it may be. If we can export cars, just as we export jewellery, to the presidential and royal palaces of the world, that is excellent for Britain's trade.
My hon. Friend the Member for Coventry, North was concerned about employment in the industry. Nothing he said told us how we can improve employment or maintain it. In Birmingham there are 1,800 trades in all, and hundreds of those trades are directly or indirectly affected by the motor car industry. Indeed, if the motor car industry were removed from Birmingham the situation would be very serious. I am very pleased when I hear my hon. Friends from Scotland ask that the motor car industry should go to Scotland, to areas where there is unemployment, and I am very pleased to think that such proposals can be considered. But how can the motor car manufacturers plan ahead if they do not know in advance what the likely prospects will be?
I come now to the new Clause which the hon. Member for Kidderminster (Mr. Nabarro) has put before us. Hon. Members may sometimes object to the manner in which the hon. Gentleman moves his Amendments or new Clauses, but I am bound to say that I thought the case he advanced this afternoon was unanswerable. Even if he had stuck to the brief of the Society of Motor Manufacturers and Traders he would have had a formidable case to put. I have read that statement very carefully and I must say at once that I have heard nothing in the debate today to convince me that its advocacy is wrong.
The motor manufacturers tell us that 1 million people are concerned, directly or indirectly, in the motor car industry. That is a very important section of the community. The hon. Member for Kidderminster referred to the total value of exports last year. He gave the figure of £540 million, but the Society of Motor Manufacturers and Traders gives £550 million as the total value of exports. This, again, is a very important matter.


An overseas earning capacity of £1,000 every minute is not to be ignored, and, in my view, we ought to listen carefully to the arguments which have been put before us.
7.15 p.m.
It has been said this afternoon that the production of cars for the home market is important in order to improve exports. The hon. Member for Kidderminster gave us some figures. I was interested to compare the production for home demand in this country with that in Western Germany. According to the figures for 1954, the home demand for the United Kingdom was then 384,000. That went up to 635,000 in 1959. In Germany, the figure rose from 308,000 to 790,000. Does the hon. Member for Twickenham suggest that if Western Germany can increase home demand from 308,000 to 790,000, we can do nothing in this country to compete?
There is no doubt that if the home market were free of the burden of Purchase Tax the export trade would be greatly helped and the motor manufacturers would be able to plan ahead for a great increase in production. I support the hon. Member for Kidderminster not only in regard to the Purchase Tax on motor cars but in regard to the Purchase Tax on other manufactures, gramophone records and so forth. I do not believe in the Purchase Tax. I regard it as an altogether evil tax. It ought to have been abolished long ago. We should find a better method for levying taxes, if we must, on goods which we find are important for our export trade as well as for the home market.
If the Government cannot agree on this occasion, what prospect is there that during the next year an effort will be made to make it possible for the motor car industry to produce in even greater numbers for export as well as for the home market and so improve our country's trade? Even if he cannot agree to the reduction from 50 per cent. to 37½ per cent. now—it is certainly not very much to ask—will the Economic Secretary tell us that something will be done during the coming year? The whole subject of Purchase Tax ought to be thoroughly debated and there should be some welcome changes in it at the latest in the next Budget if no improvement is to be made this time.

Mr. Barber: I intervene now, not with the intention of limiting the debate but because I think that this is a useful stage to do so and because hon. Members who were present at the end of our proceedings yesterday will remember the words of the Chancellor about the intention of finishing this stage of the Bill today. We have still got a considerable way to go.
As my hon. Friend the Member for Kidderminster (Mr. Nabarro) said if this proposal were carried into effect it would reduce the top rate of Purchase Tax by a quarter, from 50 per cent. to 37½ per cent. I am sure that we are all grateful to my hon. Friend for making this debate possible. I must point out at the outset, however, that the cost of his proposal in a full year would amount to £60 million. I think that my hon. Friend gave the figure of £55½ million. By way of explanation, I should say that my figure of £60 million, my hon. Friend will be glad to know, allows for some consequential increase in sales.
The Committee should know not only the classes of goods involved to which my hon. Friend referred but also the breakdown, into three categories of the estimated yield, which I think will assist the Committee in reaching a decision. Motor cars make up the first category which it is estimated in the forthcoming year will account for £165 million. From radio and television, valves, gramophones and records the estimated yield is £70 million and, from perfumery, cosmetics and some toilet and hairdressing goods, the estimated yield is £22 million, making a total of £257 million for the year 1960–61.

Dr. Barnett Stross: Is it not true that it is estimated that the yield from gramophone records, both at 50 per cent. and at 60 per cent., is £6½ million? Therefore, the Chancellor has lost nothing by a reduction of 10 per cent.

Mr. Barber: I have not the detailed figures with me. I think that the hon. Member came with a deputation to meet my right hon. Friend and myself. At any rate, I saw him at the Treasury on one occasion about this matter. No doubt the figure which he has given is right, but I am not able to check it at the moment.
It will be seen that the number of classes of goods chargeable at the 50 per cent. rate is quite small. On the other hand, the estimated revenue this year of over £250 million is very considerable. My hon. Friend the Member for Kidderminster said that he had been informed by the Treasury that the difference between the top rate of 50 per cent. and the standard rate of 25 per cent. was governed essentially by revenue considerations. He is quite right. There is no point in my giving him any other answer because that is true.
Of course, a reduction in any rate of taxation, considered in isolation, is always desirable, but my right hon. Friend the Chancellor has the responsibility not only to ensure that we are able to pay for the policies of which the electorate approved at the last election but also to consider the level of taxation in the light of the economic situation.

Mr. Emrys Hughes: If the Economic Secretary has to find an extra £60 million, is that not due to the fact that the Defence Estimates have been increased?

Mr. Barber: No, Sir. The position is, as I am sure the hon. Gentleman knows, that one considers the total yield of taxation against the total of Government expenditure. This is one item. If this proposal were accepted it would mean, in our estimate, that there would be a reduction in the yield of £60 million.
My hon. Friend the Member for Kidderminster referred to the fiscal inequities of my right hon. Friend during the last two or three years. In view of his reference to the past, I hope that he will not think it comes amiss from me if I also make one or two brief references to the past. I believe that no fair-minded person would dispute the fact that in Purchase Tax my right hon. Friend has a fairly good record. In 1958 the highest rate of Purchase Tax was not 50 per cent, but 90 per cent. The second highest rate was 60 per cent. In 1958, in his first Budget, my right hon. Friend not only reformed the structure of the tax to which my hon. Friend referred. He did more than that; he reduced the highest rate from 90 to 60 per cent.
My hon. Friend said a reduction in rates was, in his view, an academic con-

sideration. I asked for certain figures, and I think that the results are quite interesting. If the highest rate this year were 60 per cent. and not 50 per cent., the estimated additional yield would be £31 million this year and £42 million in a full year. When one is considering the effect of an increase or decrease in a rate of taxation, the only effective and meaningful way in which one can consider it is to make an estimate of what the effect would be in terms of money.

Mr. F. Harris: Is not my hon. Friend basing himself on the assumption that sales will remain exactly the same from one year to another? Surely it is obvious that if Purchase Tax were reduced the demand would go up and consequently the yield would go up. This is proved by figures year after year. All my hon. Friend's assumptions do not take that into account.

Mrs. Slater: Is it not true that the increase in the yield of Purchase Tax last year was largely due to that factor?

Mr. Barber: I can assure my hon. Friend and the hon. Lady that these estimates take into account any consequential changes in sales. I explained that the estimated cost of this proposal, £60 million, takes that factor into account.
The Committee will remember that in 1958 my right hon. Friend went further. He reduced considerably the number of classes of goods chargeable at the top rate. Let me give one or two examples. The Purchase Tax on greetings cards was reduced from 90 to 30 per cent., on cosmetics and perfumes from 90 to 60 per cent., and on leather goods, photographic goods, musical instruments and a number of other classes from 60 to 30 per cent. A wide range of domestic equipment, including refrigerators, washing machines, gas and electric fires, and so on, which the Committee will agree are most important items, had their rate of tax halved, from 60 to 30 per cent. A few classes of very big revenue producers were left at the 60 per cent. rate.
That was not all. In the following year, 1959, there was a further reduction of the top rate from 60 to 50 per cent. The Committee will remember that the cost of the reductions in 1959 was put at £81 million in a full year. No one, if he is fair, can doubt where the


sympathies of my right hon. Friend lie with regard to changes in Purchase Tax.
Reference has been made to the various individual industries whose products are subject to a tax of 50 per cent. I assure the Committee that we watch very carefully what happens in these various industries, but there is no evidence at present that the products on which there is a duty of 50 per cent. are unable to bear it.
A great deal of this discussion has centred around the motor industry. My hon. Friend the Member for Kidderminster referred to it at some length. Even if he used some of the figures supplied by the Society of Motor Manufacturers and Traders, I make no complaint about that, because, having seen these figures, I know perfectly well that they are among the best and most accurate figures available. This industry was also referred to by the hon. Members for Birmingham, Northfield (Mr. Chapman) and Coventry, North (Mr. Edelman). I should like to say, without elaboration, that I agree that a vital part of our export trade consists of motor cars.
I put this consideration to the Committee. If we were to reduce Purchase Tax by the extent suggested in the new Clause, would it not stimulate home demand still further beyond what the industry already cannot meet without encroaching on our supplies for the export market? I cannot accept the view that the present level of Purchase Tax is holding back our exports of motor cars.

7.30 p.m.

Mr. Nabarro: My hon. Friend will recall that I was careful to say that the level of Purchase Tax was not the only consideration, although it was a major one. If my hon. Friend has arrived at the conclusion which he has just stated, will he attempt an estimate of the quite extraordinary increase in the export of German motor cars? I am sure that he will agree at once that that increase is not based on the fact that the German motor car is better in quality or performance than the British—it simply is not. Some of the German cars may be as good, but certainly they are not better than ours. There must, therefore, be a reason for the phenomenal increase in German exports. Having regard to the fact that Germany's rate of domestic

taxation is only one-quarter of our rate of domestic taxation, would my hon. Friend not agree that that is a cardinal factor?

Mr. Barber: I certainly cannot agree that Purchase Tax is a cardinal factor in this matter. My hon. Friend says that many factors are involved in our exports of motor cars. Exactly the same is true of foreign countries. Both before and after the deputation from the motor car industry came to see my right hon. Friend we went into the matter in great detail. I can only say to my hon. Friend, as my opinion—obviously, it must be an opinion—that I do not believe that the present level of Purchase Tax is holding back our exports.
My hon. Friend referred to expansion of the motor industry. He said that Purchase Tax could be reduced and that we could have a better home market, soil more cars and have greater expansion. The fact is that the leading motor car manufacturers are already heavily committed to a policy of expansion. Hon. Members will remember that the Ford Company has decided to spend a further £25 million on the extension of its plant and that most of the other major manufacturers also have considerable plans.

Mr. F. Harris: If the credit squeeze continues the picture will shortly be very different.

Mr. Barber: I doubt that very much.

Mr. Harris: It is changing quickly now.

Mr. Nabarro: What about the Hoover sackings?

Mr. Barber: My hon. Friend complained earlier of somebody who raised a question concerning an article which was not taxed at 50 per cent. I think I am right in saying that the Hoover and other similar articles are not taxed at the 50 per cent. rate.
I should like to draw attention to one or two figures about the motor car industry. From January to March this year, the latest period for which figures are available, there was a 52 per cent. increase in production as compared with the same period last year. That is considerable. In 1958, production was 22 per cent. above the previous year and


in 1959 was 13 per cent. higher than in 1958. In the three months January to March there has been a 52 per cent. increase aver the corresponding period a year ago. In the same period exports were 55·1 per cent. higher.
I should like to refer briefly to one or two of the other matters that were mentioned by my hon. Friend. He referred to radio and television. Here, again, I can only tell him that the figures certainly do not indicate that the products of the radio and television industry cannot stand this rate of tax, although I realise that the manufacturers would all wish that it could be reduced. The latest figures, for January and February of this year, show that there was an increase in the production of radios and radiograms of 30 per cent. over the same period last year and in television sets a 17·7 per cent. increase.
My right hon. Friend referred to what he called the "typist's lipstick". I have sympathy with him. Here again, however, it is fair to point out that this is an expanding industry. It is not being held back by the Purchase Tax. My hon. Friend will remember that the rate used to be 90 per cent. It was reduced to 60 per cent. in 1958 and down to 50 per cent. last year.
My hon. Friend referred to gramophone records and said that this was a tax largely on culture. He referred casually in passing, in his inimitable manner, to "pop" records. What my hon. Friend did not tell the Committee was that over 80 per cent. of all the home market sales are of "pop" records. I do not know my hon. Friend's taste in matters of music. I like "pop" records, but I have never played them as being largely cultural.

Mr. Nabarro: Does my hon. Friend dismiss absolutely the argument I used this afternoon, not at all originally because it has been used in this Committee a hundred times before, that books are exempt from Purchase Tax and that gramophone records should, therefore, be exempt from it, notwithstanding that not all books are cultural; many are non-cultural? Not all gramophone records are cultural; many are non-cultural. There are, however, just as many trashy books as there are trashy gramophone records.

Mr. Barber: There are special reasons why it was decided at the outset of Purchase Tax that books should not be included.

Hon. Members: No.

Mr. Douglas Jay: The hon. Gentleman is not quite right. Books were included in Sir John Simon's Budget in April, 1940, and were taken out as a result of opposition by the Labour Party in the House of Commons.

Mr. Barber: I do not know whether I would accept that. My point is that it is not quite correct to suggest that the tax on gramophone records is a tax on culture.
The overriding consideration which, I regret, makes it impossible to accept the new Clause is that it would cost £60 million. My hon. Friend the Member for Kidderminster made a point which is of great importance. He said that if the tax were reduced by one-quarter to three-quarters of what it is now, the yield would not be less than the present yield. I do not want to take my hon. Friend too literally in what he said. It implies that consumption of these products would rise by one-third, which is a considerable amount. When one bears in mind that motor cars account for more than half the tax yield at the top rate and that if the reduction of Purchase Tax by one-quarter were brought about the result would be a reduction in the tax-inclusive retail price of a motor car by only about 7½ per cent.—it would be a little less than 7½ per cent. for the remainder of the goods in this category—it is doubtful whether a reduction of 7½ per cent. or less would result in an increase in consumption of one-third.

Mr. Chapman: Why is the hon. Gentleman so worried? To make comparison with other countries, in five years German home consumption of motor cars has risen by 500 per cent. Why does the Economic Secretary worry about a one-third increase here?

Mr. Barber: The hon. Member knows perfectly well that what we want and what is best for the country is an increase in the number of motor cars which are exported. The motor car industry is doing remarkably well in exports. At any rate, I throw that out to the Committee. One must consider whether it


is really true that a decrease of the selling price by 7½ per cent. would result in an increase of consumption of one-third.
I do not propose to go into great detail about the economic situation. I content myself with reminding the Committee that in his Budget speech my right hon. Friend referred not only to likely additional expenditure this year but also to the need for restraint in the economy, and he explained why it was necessary that there should be a small net increase in taxation. His overriding purpose is to prevent the return of inflation and to safeguard the balance of payments. Those are objectives which I know will commend themselves to every hon. Member. It was with these considerations in mind that my right hon. Friend did not feel able to make any net reduction in taxation.
I agree with a great deal of what was said by my hon. Friend the Member for Basingstoke (Mr. Denzil Freeth) when he explained why he did not support the Clause. To accept the Clause at a cost of £60 million would run clean counter to my right hon. Friend's appreciation of the economic situation. I was grateful to my hon. Friend the Member for Twickenham (Mr. Gresham Cooke) for his remarks, especially in view of his connections with the motor industry and the difficulty, in which he and others like him in the industry are concerned, with the tremendous demand for cars which cannot be supplied.
My hon. Friend the Member for Kidderminster said that no Committee stage would ever be complete without a discussion of the Purchase Tax. He is right, and we should be grateful to him for having given us this opportunity. I am only sorry that for the reasons I have given I cannot advise the Committee to accept the Clause.

Mr. Jay: I thought that the hon. Member for Kidderminster (Mr. Nabarro) made as good a case for the Clause as possibly could be made.

Mr. Nabarro: I am very grateful to the right hon. Gentleman.

Mr. Jay: In spite of that, I cannot recommend my hon. Friends to vote for it. The hon. Member for Kidderminster made another ferocious attack on the Chancellor whom he has now accused of

absurdity, illogicality, iniquity and turpitude, all of which reveals an interesting state of relations between hon. Members opposite. The hon. Member also accused his hon. Friend the Member for Twickenham (Mr. Gresham Cooke) of having made a disgraceful speech. I am sure that the hon. Member will follow his usual course this year and carry his Clause to the Division Lobby.
I agree with the hon. Member for Kidderminster on two points. It is ridiculous for the Chancellor to claim that he has been making reductions in Purchase Tax. In spite of what the Economic Secretary said about a pretty good record. the facts are that in 1951 the total rate of Purchase Tax was rather under £300 million, it rose in 1959–60 to £471 million, and in the current year it is £535 million. This is a very odd form of tax reduction.
I also agree with the hon. Member that one of the great flaws in the tax at present is that there are too many rates, which give rise to these absurd distinctions. The hon. Member did not remind the Committee that the tax was successfully simplified between 1947 and 1951 at least to only three rates, and that after all the changes of recent years we still have four rates and the tax is more complex than it was ten years ago.

Mr. Nabarro: I agree that when the right hon. Gentleman left office at the Treasury there were three rates but for most of his time those rates were 100 per cent., 66⅔ per cent., and 33⅓ per cent. There are now four rates. They are 50 per cent., 25 per cent., 12½ per cent., and 5 per cent., and, although I disagree with having four rates, at least they are very much lower.

7.45 p.m.

Mr. Jay: But we have four rates today and we raise nearly twice as much in tax as we did ten years ago. We say that it is desirable to deal with these taxes with a view to having fewer and lower rates than we have at present.
The reasons why I cannot agree with the hon. Member for Kidderminster are very much the reasons given by my hon. Friend the Member for Coventry, North (Mr. Edelman). If we 'have £60 million to give away by tax concession I do not think that this particular reduction in Purchase Tax is the first priority. We are


dealing here with cars, cosmetics, television sets and gramophone records. I would not call them luxuries. I think that there is a stronger case for giving relief of Purchase Tax on some of the household goods at lower categories. Clothing, household textiles, boots and shoes, linoleum, wallpaper and even ordinary soap are subject to Purchase Tax at present. We should like to see earlier priority given to reductions for those categories of goods.
I also think that this particular moment is a rather odd one at which to press as an immediate priority a reduction in Purchase Tax on motor cars, T.V. sets and "consumer durables", as I believe the experts now call things of this kind. The Chancellor tells us that the economy is suffering from overstrain. He has just introduced a new series of restrictions on hire purchase. The trade figures in the last week or two have shown clearly that we are not exporting on the scale that is desirable. This, therefore, would be an odd moment to choose to make a reduction in tax on consumer goods of this kind.
If I were convinced that a reduction in Purchase Tax, as has been argued, would lead to an increase in the export of motor cars, I would certainly support it, but I think that here the hon. Member for Kidderminster failed to make his case. If he is going to make his case by comparing our exports of motor cars with those of Germany and other countries, he must explain why British motor car exports have risen a good deal faster than the exports of other British goods which are not subject to such a high rate of Purchase Tax. Surely the simple point in this argument which we have often had in Committee about the relation of Purchase Tax to exports is that if an industry is working below capacity an increase in home sales can help exports. But if the industry is working to full capacity it is not possible to argue that an increase in demand at home will increase exports quickly.
There has been no dispute in the Committee that the motor car industry is working to capacity today. The hon. Member for Twickenham said courageously that he was pestered by orders and he did not see the immediate need for this reduction. My hon. Friend the Member for Birmingham, Northfield

(Mr. Chapman) considerably weakened his case by using the phrase, "with waiting lists as long as they are today". I cannot think that this is the most pressing moment to argue that a reduction in tax would lead to an increase in exports. Therefore, it does not seem to us that this is a first priority in the matter of reducing Purchase Tax.
My hon. Friend the Member for Coventry, North said, and I entirely agree with him, that we must be prepared to use Purchase Tax to some extent as what we call an instrument of fiscal control. The hon. Member for Kidderminster does not want to do that, but if he does not do it he will deprive the Government of the opportunity to use Purchase Tax to put some restraint on the demand for certain articles and the Government will have to move even further in the direction of using the credit squeeze to reduce the pressure on the economy. Hon. Gentlemen opposite have an ideological objection to physical controls. If they are to have an ideological objection also to using the Budget whenever we get into this state which the Chancellor calls overstrain, we shall have higher interest rates every time, and the effect of that is clearly to strike at investment rather than consumption in order to exercise some restraint.
The hon. Member for Twickenham earlier today quoted United Nations and O.E.E.C. figures which show most alarmingly that this country is falling behind moist European industrial countries in production, in exports and in investment. If we study these figures closely, it is very difficult to come to any other conclusion than that the main cause of this is the rather slow rate of industrial investment, which may well be due to the fact that whenever, under the present and recent Governments, we have got into a state of what is now called overstrain, it has been investment, public and private, at which they have struck rather than consumption.
If we followed the advice of the hon. Member for Kidderminster to reduce the Purchase Tax at all times and in all cases, we should be pushed even further in that direction. For these reasons, I must agree with my hon. Friend the Member for Coventry, North and others that this is not the first priority at the present time. We intend to press at a later stage in this debate for reductions


in the rate of Purchase Tax on even more essential household goods than these, and we hope to see this tax both simplified and reduced in weight as the years go by.

Mr. Ellis Smith: Divide.

Mr. Emrys Hughes: I do not wish to prolong the debate. I do not usually take part in debates on the Finance Bill, but I have listened to the case put by the hon. Member for Kidderminster (Mr. Nabarro), and have been waiting for a satisfactory answer from both Front Benches. I must say that the balance of the argument seems to be in favour of the hon. Member for Kidderminster, and I do not know whether that will be an embarrassment to him or not.

Mr. Nabarro: The hon. Gentleman will recall that the only occasion on which he obeyed a Whip in this House was in February, 1955, when he obeyed my Whip on the Clean Air Bill.

Mr. Hughes: There is a certain historical relevance, in that that was not the only occasion on which I have obeyed a Whip.
To me, this has been a most interesting and illuminating debate, especially in regard to the facts which have been brought out about competition with West Germany. There was, indeed, what semed to me to be an extremely relevant interruption from the hon. Member for Stoke-on-Trent, South (Mr. Ellis Smith), who asked, when these figures were being quoted about the tremendous and sensational rise of the export industry of Germany, who won the war. It was, indeed, a relevant question. We have been given figures from both sides of the Committee to show that, in spite of the immense destruction caused in Germany during the last war, German industry has risen from practically nothing and is now able to compete with British industry and is likely to gain advantages in export markets in other parts of the world.
I suggest to the hon. Member for Kidderminster that he might carry his researches a little further and pursue that point. It is quite true that the hon. Member who speaks for the Treasury has to collect the money, but why? To pay for the last war and to prepare for another war. If he has to prepare for

another war, it means that he has to get the money from somewhere, and, as a result of defence expenditure going up by £110 million, he has to find an extra £60 million. I leave that point, because I know that I am getting near the borderline of order.
These are relevant considerations, which I hope the hon. Member for Kidderminster will consider, as a result of my following him into the Division Lobby tonight. I believe that the problems of the Exchequer are serious, because of other expenditure. I believe that this reduction in the Purchase Tax, though I do not believe that it should be considered as a priority, would be a necessary contribution to shifting the balance of British industry and investment into productive instead of wasteful industry. It is because I want to see an approach made in this direction and because I think that, on the whole, the hon. Member for Kidderminster has made his case, that I propose to embarrass him by voting in the same Lobby with him on this new Clause.

Mr. Reynolds: I came into the Chamber after the last Division, and saw that the hon. Member for Kidderminster (Mr. Nabarro) was likely to speak. As usual, when I am able to do so, I sat here awaiting his speech, which I thought would be at least instructive. I was not disappointed. We heard another vitriolic attack on the Chancellor of the Exchequer and his Front Bench which to me is more nauseating every time I hear it. No doubt, the hon. Member receives publicity from it which would make my hon. Friend the Member for Nelson and Colne (Mr. S. Silverman) green with envy.

Mr. Nabarro: That is very unkind.

Mr. Reynolds: The hon. Gentleman can hardly complain of my being unkind, when he has accused me of being bigoted and incapable of accepting a reasoned argument. He cannot say that I am now being unkind, but I am sure that his back is broad enough to allow that to fall off without making any impression at all.

Mr. Nabarro: Hear, hear.

Mr. Reynolds: I wish to make one or two points with regard to the effect of Purchase Tax on motor vehicles. As


I understand the hon. Gentleman's argument, he was arguing that a reduction in the Purchase Tax on motor vehicles would assist the motor industry in increasing—[Interruption.]—if the hon. Member wishes to intervene, I will certainly give way.

Mr. Nabarro: I was indicating the Lobby in which to carry the "Ayes" vote on this occasion.

Mr. Reynolds: I thought the hon. Gentleman was attempting to intervene, and I should certainly give way if he wanted to do so. He tried to make out that a reduction in the Purchase Tax would make it much easier for motor vehicles to be exported. In an intervention which the hon. Gentleman permitted me to make, I said that theoretically I agreed with him, but I asked him to go on and explain it a little more. The hon. Gentleman rather brushed me off, as is his wont, by referring me to and advising me to have a look at the figures of production of commercial vehicles, in respect of which he claimed the credit for having achieved a reduction in Purchase Tax during the last year or two.
I am always quite willing to learn and to find out things, and so I had a look at the figures of commercial vehicles. I found that in 1955, throughout the year, the average monthly production of commercial vehicles was 26,071, and the average monthly exports throughout the year were 10,955. Then, we see what happens when the tax goes. Production goes up from 26,000 to 35,000 per month, while exports go up from—does the hon. Member for Kidderminster wish to intervene?

Mr. Nabarro: I am much obliged. The reason why I did not reply to the intervention of the hon. Gentleman who is now addressing the Committee is that, in my opinion, it is completely out of order to talk about articles which are not within the Purchase Tax range at 50 per cent., and that is why—[An HON. MEMBER: "The hon. Gentleman is running away."]—I am not running away—I could not reply to the hon. Gentleman. If the Chair considers that it is in order to talk about commercial vehicles which do not attract Purchase Tax at all, I will willingly reply to the hon. Gentleman after he has made his speech.

Mr. Reynolds: Some 9,000 more vehicles are being made every month; 7,500 are being sold on the home market and 1,500 are being exported. So much for that side of the hon. Gentleman's case.
Now let us have a look at something different—passenger-carrying vehicles, the figures for which are given in the Digest of Statistics. I find that since 1955—exactly the same year—the monthly figures of production have increased from 87,629 to the April figures. I do not know why the Economic Secretary gave us the figures up to March only, when the April figures are here in the Digest of Statistics, though I admit that his case, though still valid, would not then have been so pointed. Motor car production rose from 87,629 per month to about 120,000 per month. Incidentally, that is an increase in production of about 37 per cent., whereas the increase in commercial vehicle production has been only 35 per cent., so that the increase in production with vehicles carrying the 50 per cent. rate of tax is 2 per cent. greater than the increase in production of vehicles on which the tax has been completely abolished.
8.0 p.m.
In addition, whereas only one-sixth of the extra production of commercial vehicles is exported, 53 per cent. of the extra production of passenger vehicles is exported, although we have been told that a reduction of Purchase Tax makes it easier to export. The increase of exports of commercial vehicles from which the tax has been removed has shown nothing like the proportion to increased production which the extra export of passenger-carrying vehicles, bearing 50 per cent. tax, has shown.
Yet the hon. Member for Kidderminster based the whole of his argument on the ground that the motor car industry had great potentiality for increased exports which would be achieved if the tax were reduced. He referred me to the figures in respect of commercial vehicles to prove the point, but I have checked them and found that they completely disprove his argument.

Question put, That the Clause be read a Second time:—

The Committee divided: Ayes 16, Noes 231.

Division No. 114.]

AYES
[5.26 p.m.


Baxter, William (Stirlingshire, W.)
Holt, Arthur
Wade, Donald


Bellenger, Rt. Hon. F. J.
Johnson, Dr. Donald (Carlisle)
Wells, Percy (Faversham)


Biggs-Davison, John
Kerby, Capt. Henry
Williams, Paul (Sunderland, S.)


Davies, Rt. Hn. Clement (Montgomery)
Maginnis, John E.



Fell, Anthony
Noel-Baker, Francis (Swindon)
TELLERS FOR THE AYES:


Grimond, J.
Smith, Ellis (Stoke, S.)
Mr. Nabarro and Mr. Wise-


Harris, Reader (Heston)
Thorpe, Jeremy





NOES


Agnew, Sir Peter
Butcher, Sir Herbert
Duncan, Sir James


Aitken, W. T.
Campbell, Sir David (Belfast, S.)
Duthie, Sir William


Allan, Robert (Paddington, S.)
Campbell, Gordon (Moray &amp; Nairn)
Eden, John


Alport, Rt. Hon. C. J. M.
Carr, Compton (Barons Court)
Elliott, R. W.


Amory, Rt. Hn. D. Heathcoat (Tiv'tn)
Cary, Sir Robert
Emery, Peter


Ashton, Sir Hubert
Chataway, Christopher
Emmet, Hon. Mrs. Evelyn


Barber, Anthony
Chichester-Clark, R.
Errington, Sir Erie


Barlow, Sir John
Clark, William (Nottingham, S.)
Farey-Jones, F. W.


Batsford, Brian
Cooke, Robert
Farr, John


Baxter, Sir Beverley (Southgate)
Cooper, A. E.
Finlay, Graeme


Beamish, Col. Tufton
Cooper-Key, Sir Neill
Fisher, Nigel


Bell, Ronald (S. Bucks.)
Cordeaux, Lt.-Col. J. K.
Fletcher-Cooke, Charles


Bennett, F. M. (Torquay)
Cordle, John
Fraser, Ian (Plymouth, Sutton)


Bennett, Dr. Reginald (Gos &amp; Fhm)
Corfield, F. V.
Freeth, Denzil


Berkeley, Humphry
Costain, A. P.
Gammans, Lady


Bidgood, John C.
Coulson, J. M.
Gardner, Edward


Birch, Rt. Hon. Nigel
Courtney, Cdr. Anthony
George, J. C. (Pollok)


Bishop, F. P.
Craddock, Sir Beresford
Gibson-Watt, David


Bossom, Clive
Critchley, Julian
Glover, Sir Douglas


Box, Donald
Crosthwaite-Eyre, Col. O. E.
Glyn, Sir Richard (Dorset, N.)


Boyd-Carpenter, Rt. Hon. John
Crowder, F. P.
Goodhart, Philip


Style, Sir Edward
Cunningham, Knox
Goodhew, Victor


Brewis, John
Curran, Charles
Gower, Raymond


Bromley-Davenport, Lt.-Col. W. H.
Currie, G. B. H.
Grant, Rt. Hon. William (Woodside)


Brooke, Rt. Hon. Henry
d'Avigdor-Goldsmid, Sir Henry
Grant-Ferris, Wg Cdr. R.(Nantwich)


Browne, Percy (Torrington)
Deedes, W. F.
Green, Alan


Bryan, Paul
de Ferranti, Basil
Gresham Cooke, R.


Bullard, Denys
Donaldson, Cmdr. C. E. M.
Grosvenor, Lt.-Col. R. G.


Bullus, Wing Commander Eric
Drayson, G. B.
Hall, John (Wycombe)


Burden, F. A.
du Cann, Edward
Hamilton, Michael (Wellingborough)




Hare, Rt. Hon. John
Loveys, Walter H.
Robinson, Sir Roland (Blackpool, S.)


Harris, Frederic (Croydon, N.W.)
Low, Rt. Hon. Sir Toby
Robson Brown, Sir William


Harrison, Brian (Maldon)
Lucas, Sir Jocelyn (Portsmouth, S.)
Roots, William


Harvey, Sir Arthur Vere (Maccleef'd)
Lucas-Tooth, Sir Hugh
Ropner, Col. Sir Leonard


Harvie Anderson, Miss
McAdden, Stephen
Sharples, Richard


Henderson, John (Cathcart)
McLaren, Martin
Shaw, M.


Hendry, Forbes
McLaughlin, Mrs. Patricia
Shepherd, William


Hiley, Joseph
Maclean, Sir Fitzroy (Bute &amp; N. Ayrs.)
Simon, Sir Jocelyn


Hill, Mrs. Eveline (Wythenshawe)
MacLeod, John (Ross &amp; Cromarty)
Spearman, Sir Alexander


Hill, J. E. B. (S. Norfolk)
McMaster, Stanley R.
Speir, Rupert


Hinchingbrooke, Viscount
Macpherson, Niall (Dumfries)
Stanley, Hon. Richard


Hirst, Geoffrey
Maddan, Martin
Stevens, Geoffrey


Holland, Philip
Maitland, Cdr. Sir John
Storey, Sir Samuel


Hope, Rt. Hon. Lord John
Markham, Major Sir Frank
Studholme, Sir Henry


Hopkins, Alan
Marples, Rt. Hon. Ernest
Summers, Sir Spencer (Aylesbury)


Hornby, R. P.
Marshall, Douglas
Sumner, Donald (Orpington)


Hornsby-Smith, Rt. Hon. Patricia
Marten, Neil
Talbot, John E.


Howard, Gerald (Cambridgeshire)
Mawby, Ray
Thomas, Leslie (Canterbury)


Howard, John (Southampton, Test)
Maydon, Lt.-Cmdr. S. L. C.
Thomas, Peter (Conway)


Hughes Hallett, Vice-Admiral John
Montgomery, Fergus
Thompson, Kenneth (Walton)


Hughes-Young, Michael
Morgan, William
Thompson, Richard (Croydon, S.)


Hutchison, Michael Clark
Mott-Radclyffe, Sir Charles
Thornton-Kemsley, sir Colin


Iremonger, T. L.
Neave, Airey
Tiley, Arthur (Bradford, W.)


Irvine, Bryant Godman (Rye)
Noble, Michael
Tilney, John (Wavertree)


Jackson, John
Nugent, Sir Richard
Turner, Colin


James, David
Oakshott, Sir Hendrie
Turton, Rt. Hon. R. H.


Jenkins, Robert (Dulwich)
Osborn, John (Hallam)
Tweedsmuir, Lady


Jennings, J. C.
Osborne, Cyril (Louth)
van Straubenzee, W. R.


Johnson, Eric (Blackley)
Page, A. J. (Harrow, West)
Vane, W. M. F.


Johnson Smith, Geoffrey
Pannell, Norman (Kirkdale)
Vaughan-Morgan, Sir John


Joseph, Sir Keith
Pearson, Frank (Clitheroe)
Vickers, Miss Joan


Kerans, Cdr. J. S.
Peel, John
Wakefield, Edward (Derbyshire, W.)


Kerr, Sir Hamilton
Percival, Ian
Ward, Dame Irene (Tynemouth)


Kimball, Marcus
Peyton, John
Watkinson, Rt. Hon. Harold



Pickthorn, Sir Kenneth
Watts, James


Kirk, Peter
Pilkington, Capt. Richard
Whitelaw, William


Lagden, Godfrey
Pott, Percivall
Williams, Dudley (Exeter)


Lambton, Viscount
Powell, J. Enoch
Wills, Sir Gerald (Bridgwater)


Lancaster, Col. C. G.
Price, David (Eastleigh)
Wilson, Geoffrey (Truro)


Leather, E. H. C.
Prior, J. M. L.
Wolrige-Gordon, Patrick


Leavey, J. A.
Prior-Palmer, Brig. Sir Otho
Wood, Rt. Hon. Richard


Legge-Bourke, Maj. Sir Harry
Profumo, Rt. Hon. John
Woodhouse, C. M.


Lewis, Kenneth (Rutland)
Ramsden, James
Woodnutt, Mark


Lilley, F. J. P.
Rawlinson, Peter
Woollam, John


Lindsay, Martin
Redmayne, Rt. Hon. Martin
Worsley, Marcus


Linstead, Sir Hugh
Rees, Hugh



Litchfield, Capt. John
Renton, David
TELLERS FOR THE NOES:


Longbottom, Charles
Ridley, Hon. Nicholas
Colonel J. H. Harrison and


Longden, Gilbert
Ridsdale, Julian
Mr. Brooman-White.

Division No. 115.]
AYES
[8.2 p.m.


Awbery, Stan
Rankin, John
Watkins, Tudor


Baxter, William (Stirlingshire, W.)
Royle, Charles (Salford, West)
Wells, Percy (Faversham)


Bowles, Frank
Silverman, Julius (Aston)
Yates, Victor (Ladywood)


Davies, S. O. (Merthyr)
Silverman, Sydney (Nelson)
Zilliacus, K.


Hughes, Emrys (S. Ayrshire)
Smith, Ellis (Stoke, S.)



Pavitt, Laurence
Stross, Dr.Barnett (Stoke-on-Trent, C.)
TELLERS FOR THE AYES:




 Mr. Nabarro and Mr. Chapman.




NOES


Agnew, Sir Peter
George, J. C. (Pollok)
Matthews, Gordon (Meriden)


Amory, Rt. Hn. D. Heathcoat (Tiv'tn)
Gibson-Watt, David
Maudling, Rt. Hon. Reginald


Ashton, Sir Hubert
Glover, Sir Douglas
Mawby, Ray


Atkins, Humphrey
Glyn, Sir Richard (Dorset, N.)
Maydon, Lt.-Cmdr. S. L. C.


Barber, Anthony
Goodhart, Philip
Montgomery, Fergus


Barlow, Sir John
Goodhew, Victor
Morgan, William


Barter, John
Gower, Raymond
Mott-Radclyffe, Sir Charles


Batsford, Brian
Grant, Rt. Hon. William (Woodside)
Neave, Airey


Baxter, Sir Beverley (Southgate)
Grant-Ferris, Wg Cdr. R.(Nantwich)
Nugent, Sir Richard


Beamish, Col. Tufton
Green, Alan
Oakshott, Sir Hendrie


Bennett, F. M. (Torquay)
Gresham Cooke, R.
Orr-Ewing, C. Ian


Berkeley, Humphry
Grosvenor, Lt.-Col. R. C.
Osborn, John (Hallam)


Bidgood, John C.
Hamilton, Michael (Wellingborough)
Osborne, Cyril (Louth)


Biggs-Davison, John
Harris, Frederic (Croydon, N.W.)
Page, A. J. (Harrow, West)


Birch, Rt. Hon. Nigel
Harris, Reader (Heston)
Page, Graham


Bishop, F. P.
Harrison, Brian (Maldon)
Panned, Norman (Kirkdale)


Black, Sir Cyril
Harrison, Col. J. H. (Eye)
Pearson, Frank (Clitheroe)


Bossom, Clive
Harvey, John (Walthamstow, E.)
Percival, Ian


Bourne-Arton, A.
Hendry, Forbes
Peyton, John


Box, Donald
Hicks Beach, Maj. W.
Pickthorn, Sir Kenneth


Boyd-Carpenter, Rt. Hon. John
Hiley, Joseph
Pilkington, Capt. Richard


Boyle, Sir Edward
Hill, J. E. B. (S. Norfolk)
Pott, Percivall


Braine, Bernard
Hirst, Geoffrey
Powell, J. Enoch


Brewis, John
Holland, Philip
Price, David (Eastleigh)


Bromley-Davenport, Lt.-Col. W. H.
Hopkins, Alan
Prior, J. M. L.


Brooman-White, R.
Hornsby-Smith, Rt. Hon. Patricia
Prior-Palmer, Brig. Sir Otho


Bryan, Paul
Howard, Gerald (Cambridgeshire)
Profumo, Rt. Hon. John


Burden, F. A.
Howard, John (Southampton, Test)
Ramsden, James


Butcher, Sir Herbert
Hughes Hallett, Vice-Admiral John
Rawlinson, Peter


Campbell, Gordon (Moray &amp; Nairn)
Hughes-Young, Michael
Redmayne, Rt. Hon. Martin


Carr, Compton (Barons Court)
Hutchison, Michael Clark
Rees, Hugh


Carr, Robert (Mitcham)
Iremonger, T. L.
Rees-Davies, W. R.


Cary, Sir Robert
Irvine, Bryant Godman (Rye)
Renton, David


Chichester-Clark, R.
Jackson, John
Ridley, Hon. Nicholas


Clark, Henry (Antrim, N.)
James, David
Roberts, Sir Peter (Heeley)


Clark, William (Nottingham, S.)
Jenkins, Robert (Dulwich)
Robinson, Sir Roland (Blackpool, S.)


Collard, Richard
Jennings, J. C.
Roots, William


Cooke, Robert
Johnson, Dr. Donald (Carlisle)
Ropner, Col. Sir Leonard


Cooper, A. E.
Johnson, Eric (Blackley)
Sharples, Richard


Cooper-Key, Sir Neill
Johnson Smith, Geoffrey
Shaw, M.


Cordeaux, Lt.-Col. J. K.
Jones, Rt. Hn. Aubrey (Hall Green)
Shepherd, William


Cordle, John
Kerans, Cdr. J. S.
Simon, Sir Jocelyn


Corfield, F. V.
Kerby, Capt. Henry
Skeet, T. H. H.


Costain, A. P.
Kerr, Sir Hamilton
Smyth, Brig. Sir John (Norwood)


Coulson, J. M.
Kimball, Marcus
Spearman, Sir Alexander


Courtney, Cdr. Anthony
Kirk, Peter
Speir, Rupert


Craddock, Sir Beresford
Lambton, Viscount
Stevens, Geoffrey


Critchley, Julian
Leather, E. H. C.
Steward, Harold (Stockport, S.)


Crosthwaite-Eyre, Col. O. E.
Leavey, J. A.
Stodart, J. A.


Cunningham, Knox
Legge-Bourke, Maj. Sir Harry
Stoddart-Scott, Col. Sir Malcolm


Curran, Charles
Lewis, Kenneth (Rutland)
Storey, Sir Samuel


Currie, G. B. H.
Lilley, P. J. P.
Studholm, Sir Henry


Dance, James
Lindsay, Martin
Summers, Sir Spencer (Aylesbury)


d'Avigdor-Goldsmid, Sir Henry
Linstead, Sir Hugh
Sumner, Donald (Orpington)


Deedes, W. F.
Litchfield, Capt. John
Talbot, John E.


de Ferranti, Basil
Longbottom, Charles
Tapsell, Peter


Donaldson, Cmdr. C. E. M.
Loveys, Walter H.
Teeling, William


Doughty, Charles
Low, Rt. Hon. Sir Toby
Thomas, Leslie (Canterbury)


Drayson, G. B.
Lucas, Sir Jocelyn (Portsmouth, S.)
Thomas, Peter (Conway)


du Cann, Edward
Lucas-Tooth, Sir Hugh
Thompson, Kenneth (Walton)


Duncan, Sir James




Elliott, R. W.
McAdden, Stephen
Thompson, Richard (Croydon, S.)


Emery, Peter
MacArthur, Ian
Thorneycroft, Rt. Hon. Peter


Emmet, Hon. Mrs. Evelyn
McLaren, Martin
Tiley, Arthur (Bradford, W.)


Errington, Sir Eric
Maclean, Sir Fitzroy (Bute &amp; N. Ayrs.)
Tilney, John (Wavertree)


Farey-Jones, F. W.
MacLeod, John (Ross &amp; Cromarty)
Turner, Colin


Farr, John
McMaster, Stanley R.
Turton, Rt. Hon. R. H.


Finlay, Graeme
Macpherson, Niall (Dumfries)
van Straubenzee, W. R.


Fisher, Nigel
Maddan, Martin
Vane, W. M. F.


Fletcher-Cooke, Charles
Maginnis, John E.
Vickers, Miss Joan


Fraser, Hn. Hugh (Stafford &amp; Stone)
Markham, Major Sir Frank
Vosper, Rt. Hon. Dennis


Fraser, Ian (Plymouth, Sutton)
Marlowe, Anthony
Ward, Dame Irene (Tynemouth)


Freeth, Denzil
Marshall, Douglas
Watts, James


Gardner, Edward
Marten, Neil
Wells, John (Maidstone)




Whitelaw, William
Wise, A. R.
Worsley, Marcus


Williams, Dudley (Exeter)
Wolrige-Gordon, Patrick



Williams, Paul (Sunderland, S.)
Woodhouse, C. M.
TELLERS FOR THE NOES:


Wills, Sir Gerald (Bridgwater)
Woodnutt, Mark
Mr. Edward Wakefield and Mr. Noble


Wilson, Geoffrey (Truro)
Woollam, John

New Clause.—(RELIEF FROM PROFITS TAX FOR CO-OWNERSHIP SCHEMES.)

(1) Where in accordance with a co-ownership scheme approved as is provided in this section a body corporate makes an appropriation within the meaning of this section, a sum equal to one hundred per cent. of the amount of the appropriation shall be allowed to be deducted as an expense in computing the profits or gains of the said body corporate for the purposes of income tax and profits tax.

(2) For the purposes of this section a body corporate shall be deemed to have made an appropriation of the amount hereinafter specified in the following circumstances, that is to say:—
(a) Where a body corporate has applied profits to or towards the paying up of shares in the said body corporate held by persons employed by it, the amount equal to the profits so applied; or
(b) where shares in a body corporate have been purchased at the expense of the body corporate with a view to their resale to persons employed by said body corporate or to their being transferred to such persons and have been so sold or transferred, the amount by which their purchase price is in excess of any value or money paid or given by the employees in respect of such sale or transfer.

(3) For the purposes of this section "co-ownership scheme" means a scheme which is approved for those purposes by the Commissioners of Inland Revenue, and, subject as hereinafter provided, the said Commissioners shall not approve any fund unless it is shown to their satisfaction that:—
(a) the object of the scheme is to enable persons employed by a body corporate to acquire on favourable terms and hold shares therein;
(b) the scheme applies generally to persons employed by the body corporate and is not restricted to any particular class or classes of such persons;
(c) the shares acquired under the scheme by persons employed by the body corporate are deposited by said body corporate on their behalf in Employees Saving's Accounts as is provided in section (Tax reliefs and deferment of taxation for Employee's Savings Accounts) of this Act;
(d) the value of shares so deposited under any scheme on behalf of any individual shall not exceed the sum of one hundred pounds in any year of assessment; and
(e) the scheme contains no provisions in any way restricting the right of any person to hold or dispose of shares already acquired by him under the scheme in the event that he ceases to be employed by the body corporate.

(4) Approval under the last foregoing subsection shall not be withheld by reason only that:—
(a) employees with less than a specified period of service with the body corporate are excluded in whole or in part from the scheme;
(b) employees with more than a specified period of service are entitled to proportionately greater benefits under the scheme;
(c) the scheme provides for the exclusion of persons not required to devote the whole or substantially the whole of their time to the service of the body corporate;
(d) the benefit accruing to individuals by reason of an appropriation is related to the wage or salary earned by them;
(e) the scheme makes reasonable provision that no person may assign shares in respect of which he has benefited from an appropriation without first offering them to existing shareholders; or
(f) benefits accrue under a scheme only to such individuals as elect to participate in it, provided that, subject to the foregoing provisions of this subsection, employees are generally entitled so to elect and such entitlement is not restricted to any class or classes of employees.

(5) The Commissioners of Inland Revenue may make regulations generally for the purpose of carrying this section into effect, and, in particular, may by such regulations:—
(a) require the body corporate to deliver to the said Commissioners such information and particulars as the said Commissioners may reasonably require for the purposes of this section;
(b) prescribe the manner in which claims for relief under this part of this Act are to be made and approved and in which applications for the approval of a co-ownership scheme are to be made, and
(c) provide for the withdrawal of approval in the case of a scheme which ceases to satisfy the requirements of this section.

(6) The power conferred by subsection (5) to make regulations shall be exercisable by statutory instrument.—[Mr. Wade.]

Brought up and read the First time.

Mr. Donald Wade: I beg to move, that the Clause be read a Second time.
I should explain that, although the title refers to Profits Tax, the Clause covers Income Tax. I shall refer to that fact again in a few moments. The Clause deals with one aspect of our policy of co-ownership. I do not propose to restate the whole case for a


wider distribution of individually owned capital wealth, or even for employee shareholding, but I shall be glad to answer any objections which may be raised during the debate. I have one or two general observations to make before referring to the Clause in detail.
In considering the future development of industry, it is important that we should have some positive aims. First, it is not good enough merely to be against an extension of State ownership or, on the other hand, against private capitalism. Nor, in my view, does it suffice to say that one is in favour of a mixed economy. We hear that expression used very often today, but it is not always clear what is meant. If we mean a mixture of State Socialism and monopoly capitalism I am not very enthusiastic about it, but if we mean that there is a value in the private sector of industry and in private enterprise, and that we wish to see an extension of the idea of partnership in industry, I think that it is to be commended.
Secondly, all kinds of gimmicks have been put forward in recent years to persuade people to buy industrial shares. So long as they are well advised, that is all to the good. I want to see this extension of ownership and people owning more shares in industry, but the mere purchasing of shares on the stock market does not necessarily create this greater sense of partnership, whereas employee shareholding may help to bring this about.
Thirdly, in the past it has been suggested that it is not a good idea for employees to put their money into the firm in which they work, or for anyone to have all his eggs in one basket. I appreciate that argument, but a great deal of study has been given to this matter in recent years and many firms have worked out employee shareholding schemes in which the employees have shares not only in the firm in which they work, but in other firms as well. The risk is well spread. A great deal of thought has been given to the subject, and the kind of pitfalls that were met with twenty-five years ago are not necessarily met with today.
So much for the objections. I agree that creating an employee shareholding scheme is no substitute for good human relationships in industry, which are absolutely vital, but very often one finds that

there is a better chance of creating this improved atmosphere where there is a sharing of ownership, profits and responsibilities. That is fundamental to the idea of co-ownership.
The Clause is one of a number of proposals designed to facilitate the introduction of co-ownership schemes. At the same time, it would facilitate the extension of what I call popular ownership. I believe that it was during the Second Reading debate on last year's Finance Bill that I said that I would like to see a whole part of the Bill devoted to this extension of ownership and the encouragement of employee shareholding, and so on. We have separate parts in Finance Bills, but no post-war Government have thought it worth while to devote one part to this subject. There have been expressions of good will, but very little more.
8.15 p.m.
This may be due to the belief that it is no concern of the Treasury—that what employers do about their shares and the introduction of these schemes is no concern of the Government, but is a matter which each firm must decide for itself. That is not altogether true. The idea that Finance Bills are concerned only with revenue raising is a complete fallacy. They have far-reaching consequences, both social and political. They have an effect upon the structure of industry and, sometimes, upon society itself. I had this fact in mind in tabling the Clause. One of its aims is to ensure that there will be specific recognition of co-owner-ship in our tax laws. One of the effects of passing the Clause would be that the Inland Revenue authorities would give official recognition to co-ownership schemes.
There is nothing very unusual in that, in principle. Pension schemes and life assurance schemes are recognised, and I would like to see co-ownership officially recognised. Of course, it can be encouraged in other ways. Earlier this evening a statement was made about the sale of S. G. Brown Ltd. I should like to see, as a condition of sale, the introduction of an employees' shareholding scheme, to ensure that the workers in the firm would enjoy any benefits of future prosperity. I put that proposal forward a year ago, and I am


sorry that the Government did not adopt it. However, I must not pursue that matter now.

Mr. John McCann: Would not the hon. Member have preferred its not being sold at all, but remaining for the benefit of the country in general?

Mr. Wade: That is a different matter, which I must not discuss now. But I met representatives from the firm and they were interested in the suggestions put forward to the Government at the time.
I wish to see the policy of co-ownership officially recognised in our Income Tax laws and, at the same time, some of the tax obstacles removed. The following proposed new Clause Tax—reliefs and deferment of taxation for Employee's Savings Accounts—is not being called, and we must not discuss it. I would only say that it is similar to the Clause which was debated two years ago, and which, unfortunately, was not accepted. It related to tax obstacles as they affected employees, whereas the Clause that we are now debating relates to tax obstacles as they affect employers.

The Financial Secretary to the Treasury (Sir Edward Boyle): I realise that only the Clause that we are now discussing has been selected, but the Clause and the following Clause are closely knit, and it might be for the convenience of the Committee if hon. Members were allowed to make an occasional reference to the following Clause. Would that be permissible, Mr. Blackburn?

The Temporary Chairman (Mr. F. Blackburn): No. It would be entirely out of order. The hon. Member for Huddersfield, West (Mr. Wade) has been out of order in dealing with the Clause, and we had better keep the debate confined to the Clause which has been moved.

Mr. McCann: Is it not a fact that there have been co-ownership schemes where an attempt has been made to differentiate between a man getting a straight payment which is liable to Income Tax as a bonus, or shares which, under the law that we are not discussing, are free of Income Tax?

The Temporary Chairman: So long as the hon. Member relates his speech

to the new Clause which has been moved he will be in order.

Mr. Wade: I may be able to deal with the point while debating the new Clause No. 22, but it was by way of explanation that I pointed out that the Clause related in particular to the difficulties of the employer as opposed to those of the employee.
This new Clause is designed to facilitate the creation of employee shareholding schemes. It is true that a number of firms have drawn up schemes under the existing law. I will not enter into an explanation about how that is done. Generally, it is done by creating trustees and making payments to trustees. But it is all rather difficult and involved under the present law, and I suggest that there is no reason why the difficulties should remain. Let me give the simplest possible case.
If, at the end of the financial year, a firm has a surplus to distribute, if it distributes the surplus to the employees in the form of a cash bonus, that is clearly an expense which can be deducted before the payment of tax. But if the equivalent distribution is made in the form of shares the amount is not deductible before arriving at the amount of tax to be paid by the company. There are other problems concerning the employee. If he gets a share certificate he will at once himself be assessed. But I cannot discuss that, as this Clause relates only to the employer.
I wish to see an alteration in our Finance Acts in order to make it easier for a firm which wishes to adopt an employee shareholding scheme and to ensure that where shares are allotted in lieu of a cash bonus it will not put the firm at a disadvantage either as regards Profits Tax or Income Tax. Otherwise, I think that there will be a penalty on the firm adopting an employee shareholding scheme.
That is not only my personal opinion. For a number of years we have advocated this and as far back as 1956—although the wording was slightly different the intent was the same—I moved a new Clause which was commented on in the issue of the Economist of 30th June, 1956, as follows:
…the most important of the Liberal amendments would have removed a disability from genuine share distribution schemes as


distinct from the milder and more usual form of scheme whereby employees get a cash bonus.
The writer continued:
As the Liberal amendment would have been an incentive to saving, instead of spending, it is a pity that the Government did not let it go through.
That is the principle of this Clause, all the details are concerned merely with ensuring that it facilitates genuine co-ownership schemes. The idea is not merely to help a few top executives. The reason for the details—

Mr. J. T. Price: Will the hon. Gentleman explain whether he is proposing, as part of this transaction, that new categories of employee shareholdings should be created or merely that existing shares already allocated under the companies' articles are to be obtained in some way through the Stock Exchange and held in reserve to be distributed? Otherwise, what he is proposing is that the capital of the company be increased by a large infusion of employee shareholdings without the disabilities which usually accompany such an extension of capital.

Mr. Wade: I think that one has to consider each firm individually regarding an increase in the amount of shares and whether that it advisable. I think I understand the point which the hon. Gentleman has advanced and I am trying to answer it. I am endeavouring to obtain the introduction of this principle. Once we have the principle a firm would have to consider whether it wished to capitalise some of its profits and issue shares to its employees, or whether it wished to put money on one side through trustees to buy shares already on the market. It is a matter for each firm to consider, but I think that the first thing is to get the principle adopted.
The reason for the details in the Clause is to ensure, as I have said, that these are genuine co-ownership schemes. Subsection (1) defines the appropriation to be allowed to be set off for Income Tax and Profits Tax purposes. Subsection (2) deals with that in further detail. It appears to us that the best method would be to lay down certain principles which must be observed in a co-ownership scheme and that the scheme should be approved by the Inland Revenue. I suggest that while we make them as flexible as possible there

should be certain rules applicable to co-ownership schemes.
In the first place, they should apply to employees generally and not be just a "top hat" scheme. Secondly, I suggest that they might be operated through an employees' savings account, but I cannot pursue that because it would involve the other new Clause on the Notice Paper. I hope that the Chancellor will not take a technical point and say that he cannot accept this Clause merely because it refers to something which is elaborated in another Clause. One can get round that. If the Chancellor will accept the principle of the Clause, that is not an insuperable objection. I recognise that this point arises in paragraph (c) of subsection (3), but we can get over that difficulty.
Subsection (3, d), is limited to a total of £100 in any year of assessment per individual. That, I think is reasonable, at any rate to start.

8.30 p.m.

Mr. Joseph Slater: The hon. Member said that this new Clause is to try to get a principle accepted in regard to the bonus that a company is prepared to grant because of the proceeds in regard to profits. If production goes up in a particular week the employer grants the employee facilities on a bonus for a particular week, but how would the Clause affect that individual seeing that he is already taxed on that bonus, which is part of his wages?

Mr. Wade: I argued this two years ago in debates on the Finance Bill then. I provided the answer and suggested how the difficulty should be overcome. I cannot deal with it now, because it comes under the Clause which has not been called. There is an answer and I shall be pleased to explain it to the hon. Member, but I am debarred by the Chair from doing so tonight. I am sorry that that is so, but perhaps the hon. Member will have a look at the observations I made two years ago.
Subsection (3, e) suggests that there-should be no general restriction on sale and employees should have the right of resale. Those are the general rules, but subsection (4) of the Clause begins:
Approval under the last foregoing subsection shall not be withheld by reason only that:—


I will summarise the paragraphs. It should not be withheld because the employees have to qualify by a certain period of service. For instance, under some schemes one has to be in employment for a year before qualifying. This is not compulsory, but it would not be ruled out for that reason.
It would not be ruled out if those with more than a specified period of service were entitled to proportionately greater benefits. It would not be ruled out if certain part-time employees were excluded. It would not be ruled out if the benefits were related to the wage or salary. That is to say, those on a higher salary might get more shares than those on a lower salary. It would not be ruled out because the scheme makes reasonable provision that no person may assign shares before first offering them back to the firm. If the scheme contained a provision for offering the shares back when leaving, that would not invalidate the scheme.

Mr. McCann: I am interested in that point, because subsection (3, e) says:
the scheme contains no provisions in any way restricting the right of any person to hold or dispose of shares…"
But the hon. Member goes on to include them.

Mr. Wade: That is a fair point. The general principle would be that there should be a right to sell, but it would not be invalidated in any particular scheme if there were a provision for first offering the shares to other employees.
Finally—and I think that this is reasonable—there should be a right of individuals to elect to participate or not to participate. The scheme would not be bad merely because there was freedom to be in or out. I think that would enable a wide variety of schemes to be adopted. Circumstances differ very greatly between one firm and another. We do not want to make this too rigid. We have tried to draft it so that a wide variety of schemes would qualify and we have tried to lay down certain general principles which we think reasonable. I hope that the Chancellor will accept, if not in detail, at any rate the intention underlying the Clause. I hope that we shall have something more than an expression of good will.
At the end of the debate in 1958, the Chancellor said, with respect to the Clause to which I have referred:
I have looked carefully at the interesting suggestions made in the Clause moved by the hon. Member for Huddersfield, West (Mr. Wade). I have looked at it with a not unfriendly eye."—[OFFICIAL. REPORT, 2nd July, 1958; Vol. 590, c. 1494.]
The right hon. Gentleman then proceeded to reject it. We have heard that kind of thing before. If the Clause is not accepted, I hope that we shall have a firm undertaking to introduce on Report a Clause which will adequately cover the point I have been trying to make. Earlier in our debates we heard a request for action. This is an occasion for action on a very reasonable point. Now is the opportunity.

Mr. Gower: I added my name to the new Clause, as I have in previous years, because I support the objective which the hon. Member for Huddersfield, West (Mr. Wade) has in mind. Like him, I sincerely hope that the Government will not reject the Clause merely because of its wording, for it deals with very difficult material. Like him, too, I hope that we shall move a stage nearer tonight to the acceptance of the principle behind the Clause.
The House of Commons has expressed its approval of the principles which lie behind schemes of this character. In the Parliament of 1951–55 I had the honour, on a Friday, of introducing a Motion which called attention to the advantages which have accrued from the extension in industry of pension schemes and profit-sharing and co-partnership schemes. That Motion went rather wider than this new Clause. It was debated in great detail and it had the support of hon. Members in all parties. It was approved by the House without a Division. As a result of that Motion, certain undertakings were given, including an undertaking that there would be published in the Ministry of Labour Gazette every year details about the progress of such schemes.
I am not entirely happy about the wording of the new Clause and I do not doubt that holes could be picked in it. I am not quite happy that the Clause goes far enough, because there are reputable schemes of profit sharing which I should like to see included. Parliament has given sanction to the


idea that fiscal encouragement should be given to such schemes as insurance and pension schemes within industry, but so far we have not continued, as logically we should, to give similar fiscal encouragement to schemes of this character.

Mr. Wade: In the Clause which my hon. Friends and I tabled two years ago—a Clause which was not called—there were some fiscal inducements. My only reason for not including them tonight is that I wanted to do everything possible to ease the Chancellor's task in accepting the Clause. I have not gone back on the general idea of inducement, but I am making it a little easier for the Treasury to accept the Clause.

Mr. Gower: I am grateful to the hon. Member. I was coming to that point.
As he said, it is important at this stage that the Government should at least say not only that they regard the extension of these schemes as advantageous and desirable but also that they are prepared in future to give something like official recognition and help to the development of such schemes. I feel sure that the Labour Party should be just as firm in its support of this principle. In the debate in an earlier Parliament to which I have referred hon. Members pointed out the splendid contribution which had been made, above all, by the Co-operative movement in this work. Knowing how many hon. Members opposite regard this as a valuable contribution, I feel that they should lend much support to this principle.

Mr. George Darling: Is the hon. Member aware that the Co-operative movement would receive no benefit at all from the tax relief under this Clause?

Mr. Gower: I appreciate that there are many loopholes in this wording, but I feel that we should be making a valuable start. Indeed, we should do that if we heard a forthcoming speech from my hon. Friend the Financial Secretary, a speech in which he showed that there is something more than mere sympathy for what has been achieved in the past. What has been achieved in the past has been done without any Government recognition. It has been done in a loose and somewhat haphazard manner, with

little or no assistance from any official body, certainly not from the Government.
Numerous advantages can accrue from the extension of the principle. Many of them have been referred to in the past. One which particularly appeals to me is that such schemes tend in some degree to narrow the frontiers which have sometimes separated the different parties in industry. They tend not so much to create a spirit as to reflect a spirit. In most cases they are the culmination rather than the beginning of a better spirit.
I hope that my hon. Friend the Financial Secretary will approach the Clause in the mood that these schemes are eminently desirable and that they are just as much to be encouraged as private industrial pension schemes, which already have a good deal of fiscal help from Governments of all kinds. In that mood it is a privilege for me to say a few words in support of the principle behind the Clause.

Mr. Grimond: The Clause has been admirably explained by my hon. Friend the Member for Huddersfield, West (Mr. Wade). I very much echo the closing words of the hon. Member for Barry (Mr. Gower). I hope that we shall get from the Government and from the Committee some recognition of the importance of co-ownership. I hope that they will not be held back by any dog-in-the-manger attitude that the Clause may not benefit everybody or that there may be other ways of developing this for the general good.
I regret that, in a Budget in which there were few major fiscal changes and comparatively little alteration in the amount of taxation, the Chancellor of the Exchequer did not take the opportunity to introduce various reforms in the methods and incidence of taxation, such as the reform we are now discussing. This could have been done without adding greatly to purchasing power and without increasing whatever threat there may be of inflation.
At the moment, a most necessary thing is to alter our taxation system so as to encourage savings investment and the spread of ownership. That is what the Clause seeks to do. If we did that, we should at one blow encourage more productivity by giving incentives and


thereby restoring some of the dynamism which our economy has lacked over the last ten years. We should do that without running into the danger of inflation. We should improve industrial relations and share out more fairly the proceeds of private enterprise.
The argument is sometimes advanced that that is all very well as far as it goes; it may benefit people who are in a position to acquire shares in certain private enterprises, but it will not benefit the public at large. I do not think that that is the case. To have a fair and dynamic economy is of the greatest benefit to everybody. It is agreed on both sides that we have to run an economy in which as well as a public sector there is a large private sector. We must look continually at the private sector and try to improve it.
I sometimes think that the Labour Panty has treated the private sector of industry a little like the Liberal Party used to treat public houses—they were so disreputable that one could not talk about reforming them. This is a mistaken view, and I hope that we shall be always seeking to reform the methods of private enterprise and interest people in it.
Over recent years, more and more firms have shown themselves willing to initiate profit-sharing or co-ownership schemes. About 3½ million people now own shares of some sort. As my hon. Friend pointed out, it is already possible to charge the expenses of these schemes against profits if one sets up a complicated scheme with trustees, but our aim is to make the process easier, to make it attractive, to give genuine ownership and not merely a cash bonus, and that process is safeguarded by the powers that we suggest should be given to the Commissioners.
8.45 p.m.
I want to reinforce what my hon. Friend said in his quotation from the Economist. When a similar Clause was put down before, it was approved as a means of encouraging savings, and I would also draw the attention of the Committee to the remarks of the City Editor of The Times in 1958 when he said that a further extension of profit-sharing schemes in industry would depend on some tax concessions. He pointed out

that there were serious barriers in Schedules D and E. We have been largely concerned with the removal of barriers, and not with discrimination by giving concessions.
I want to turn, if I may, to some of the objections that are made against this new Clause. I sometimes feel that in these debates the Chancellor should ponder the well-known story of the man who said, "I want a one-armed lawyer." When his friend asked "Why—what is the advantage of a one-armed lawyer?" the man replied, "Well, you see, all the lawyers I go to say,' On the one hand, it is an excellent case and you may win but, on the other hand, you haven't a very good case. and may lose." In these debates the Chancellor keeps on saying that such and such is a splendid proposal but, on the other hand, there are serious objections to it. That has certainly been his attitude in previous debates on the subject.
The right hon. Gentleman has previously argued that co-ownership is a symptom and not a cause of good industrial relations. I certainly agree that it is not by any means everything. We do not pretend that it is. It is not a substitute for high wages. It is certainly not a substitute for consultation and, indeed, it is no substitute for a much firmer recognition of the status of labour throughout industry. Nevertheless, I say that it is an important integral part of the whole movement towards a better relationship.
The Chancellor has also argued that it was wrong to encourage savings by tax concessions, and has in earlier debates quoted the Royal Commission's Report in support of that contention. To some extent, this new Clause seeks a removal of barriers but I suppose that it may be taken as a concession. However, I do not think that that argument can now lie in the Chancellor's mouth, because we are always encouraging various forms of savings by concessions of one kind and another.
The Financial Secretary will no doubt say that he is in sympathy with this new Clause, but the final argument against it will be that this cannot be done this year. Last year, we had a Budget in which a good deal was given away, and the Chancellor then rejected various reforms on the ground that, though he


approved of them in principle, he had already given so much that to give more was impossible. This year, he says that he feels he cannot give any tax concessions. Therefore, once again, it is not possible to move. It is high time that co-ownership—call it what one will—was recognised in this country and encouragement given to firms in some way to take their workers into partnership.
As has already been said, this may be a badly drafted Clause. It is well known that private Members are in some difficulty in drafting such things, but the Government could easily put it right. It may be that it should be combined with a save-as-you-earn scheme, and if so, the argument of cost may be advanced. I do not know what it would cost to implement this new Clause and the Clause—Tax reliefs and deferment of taxation for Employee's Savings Accounts—which goes with it, but I seriously suggest to the Committee that it would be well worth while.
As I say, we have to make our system of private enterprise work better. We have to try to break out of this rather unhappy cycle of increased production, followed by threat of inflation, balance-of-payments difficulties and reimposition of controls. We have to give incentives. We have to interest the workers more directly in the system by which the country makes its wealth and they earn their wages, and if this year the Chancellor will have the courage to grasp this opportunity we can at least make this small move to get out of some of the difficulties of the private enterprise side of the economy with, I think, resultant savings, and without running into any serious dangers of increasing inflationary pressure.

Mr. William Small: I was rather intrigued by the over-simplification of this Clause on the principle of co-ownership, because there is one firm in this country which operates a co-ownership profit sharing scheme which is threatening the employees with the withdrawal of their rights under the scheme if they take unconstitutional action within any factory. Oversimplification of the promotion of such development is that it endangers employer-employee relationship.
In practice, it is not so simple, because we are giving over to the salaried

individuals in industry, who already enjoy salaries of £5,000 against the workers with £500, a disproportionate allocation by the fact that they are now getting a contribution in excess of their existing salary by preferential Income Tax rates of 5s. 6d. in the £. The oversimplification of giving tax relief based on profit sharing should, I think, be examined.

Mr. George Darling: The Leader of the Liberal Party said that this was probably a very badly drafted Clause and might be full of loopholes. That is perfectly true, and I will point out some of them in a moment. I think that the Government would have great difficulty in trying to put this Clause into any workable shape. The whole matter, I suggest, has to be approached completely afresh.
We are not opposed to profit sharing and to the workers getting a greater share of the income from industry. We are not opposed to the workers of this country, if they want to own shares in industry, buying them—it is a free country—but we cannot agree to a proposition where the workers have no choice at all as to whether the bonus is to be paid to them in the form of cash or shares.

Mr. Wade: It does not necessarily follow.

Mr. Darling: We cannot agree with the principle—

The Temporary Chairman: Will the hon. Member address the Chairman and not just the Liberal Party?

Mr. Darling: I am sorry, Mr. Blackburn, but the Liberal Party is now behind me and that makes it rather difficult, but I shall keep in order.
We cannot agree with the principle that lies behind this Clause, or appears to lie behind it, that before an employee can have a stake in the industry in which he works, a stake which would allow him either through his trade union or shop committee or whatever it is to express views to the management and take part in the management and control of the company, he must become a shareholder. We say that, in our view, the workers in industry have a complete right to share in the management of the industry


whether or not they have any shareholdings. That is not implicit in the Clause, but I will come to that again in a moment.
I think it should be noted that there is a question of arithmetic involved. All the successful profit-sharing schemes are in the highly mechanised industries with low labour costs and making goods for which there is a steady or expanding demand. The Clause suggests that this kind of scheme could operate in all kinds of industry. I think that, if we examine the situation, the proposers of this approach would find that it would be extremely difficult indeed to operate profit-sharing schemes or bonus distribution schemes on anything like the scale that we now have in some of the larger low labour cost industries, in industries which have high labour costs. It is quite untrue to say, as is sometimes suggested, that good labour relations are confined to profit-sharing firms.
I do not wish to develop this point too much, but it is a very important point which should be examined. It is the nature of the industries, and not profit sharing, which makes for good relations, and it is wrong to ignore the profit-making and profit distribution difficulties of industries with high labour costs and uncertain markets. Neither the co-owner-ship schemes dealt with in this Clause nor any other profit-sharing scheme of a like kind could apply to much more than one-third of the employees in the country, because it would be extremely difficult for the workers who are engaged in public services like local government, in transport, in the docks and in many of the forms of distribution and so on to have any profit-sharing scheme prepared for them.
I do not want to develop the argument much further—I should probably get out of order if I did—but we say that the complicated arrangements which are proposed in this scheme seem to us to defeat the purpose which the Liberal Party itself has in mind. It is surely easier to have a straightforward bonus distribution and encourage employers, if they wish to do so and if the employees agree, to have the workers' share of the profits of the company paid out in a straightforward manner in the form of a cash bonus at the end of the firm's accounting period. I am making a good Liberal

proposal. It gives the worker the opportunity of deciding what he is going to do with the bonus that he gets—whether to spend it or buy shares or do something else with it.
Although the hon. Member for Huddersfield, West (Mr. Wade) rather played down the risk element of a worker having both his savings and his employment in the same firm, I think this is something that we should take seriously into account. We must warn small savers of the pitfalls of risk taking. That is why the unit trust movement has grown up. That is why we encourage the unit trust movement. If people with small savings wish to put their savings into equity shares, it is much better to spread the risk rather than to have all their savings that they put into equities in one form.
We suggest that it would be wrong to encourage workers to put their savings into the firm in which they are employed. Take the firm of Hoover, for example. I thought that firm was a "blue chip" company, but here are 800 workers who, if this firm had a profit-sharing scheme—I do not know whether it has or not—and if they had their savings in that firm, would be in difficulties if they happened to be on the list of dismissals.
We say that the workers should have a perfect right to put their share of the profits that they get from their employment into whatever savings they may choose, and to protect the small savers we suggest that they should he encouraged to invest in unit trusts, or National Savings, Defence Bonds, industrial and provident societies, trustee savings banks and so on.
May I repeat what I said in an intervention when the hon. Member for Barry (Mr. Gower) was speaking, that one of our objections to the scheme being put forward in this fashion is that the greatest profit-sharing and co-partnership scheme of all, the Co-operative movement, which pays Profits Tax, would get no tax relief at all.

Mr. Jeremy Thorpe: So what?

9.0 p.m.

Mr. Darling: If this is to encourage co-ownership schemes, as they are called, surely the biggest and best co-owner-ship scheme of all should have some advantage from it.

Mr. Arthur Holt: The Liberal Party voted for the Opposition's new Clause moved at an earlier stage of the debate.

Mr. Darling: Yes, but that would give relief only in regard to savings, and I should have thought that, under this kind of scheme, the same relief should be obtained. But there are other objections. Not only would the scheme not apply to co-operative societies, but, according to the Clause as drafted, there are no protective rules in it such as there are in the Co-operative movement to protect shareholders in various ways.
For example, there is no suggestion here that a company must pay recognised rates of pay before qualifying for tax relief. There is no provision for representatives of the workers to be on the committee or whatever association is to run the trust funds, the savings accounts. Apparently, they are to be run entirely by the management. According to the Clause as drafted—I am merely pointing out loopholes—there is no provision for employee representation. We regard that as a fundamental mistake if the schemes are to have any value in profit sharing.
Moreover—I do not know whether the Financial Secretary will deal with this—the scheme could be used by a company to obtain what, in effect, would be cheap tax-free loans from its employees if it issued special shares, perhaps with low rates of interest, no voting rights, and so forth. There is nothing in the Clause as drafted—I am trying to be brief and I shall not elaborate the point—to prevent a company issuing what might be called second grade shares to employees in receipt of shares distributed by it. This must be looked at very carefully. We would lay it down as a general principle in any scheme under which workers could buy shares in a company that the shares that they could buy should be ordinary or preference shares, and there should not be any second grade shares of any kind available for them. Also, the shares must have voting rights. That is another principle which we would lay down.
There are more loopholes. No doubt the Financial Secretary has seized upon them as we have seized upon them. I will not develop them now. If we had a chance to debate profit-sharing in a

wider context, which is what I should prefer, we should draw attention to the defects in this scheme in detail, and we should be quite willing to put forward suggestions of our own for putting workers' participation in industry on a much firmer basis and making the scheme more practical and fairer than it appears to be in this new Clause.
We appreciate the desire of the Liberal Party to give the worker a better status in industry, to make him something more than a hired hand, but the fundamental defect, as we see it, is the assumption that the worker must become a shareholder before his status can be improved. We reject the idea that he must, so to speak, buy his better status by becoming a shareholder. We believe that the worker's status is determined by his employment, by his being on the staff, by the contribution he makes to the progress and prosperity of the company.

Mr. Ellis Smith: And the state of organisation of the workers.

Mr. Darling: I agree entirely with my hon. Friend. Whether it is as administrator, technician, skilled worker or unskilled worker, the worker, in our view, has a perfect right to become part and parcel of the concern in which he works. He has a right to take his share in the management, through his organisations, and any suggestion that he ought to become a shareholder before his status can be improved we reject absolutely.
There are other defects in the proposal before us which I could develop if we had time. In view of the hour, I will content myself with those few criticisms of the scheme and ask for the view of the Government.

Sir E. Boyle: After the sounding brass of the hon. Member for Kidderminster (Mr. Nabarro), the Committee will have found the quiet, mellow string tone of the hon. Member for Huddersfield, West (Mr. Wade) a pleasant and refreshing experience. I should like to congratulate him most sincerely on the thoughtful way he moved the new Clause and the feeling that he obviously put into his speech. I should also like to congratulate the hon. Member for Sheffield, Hillsborough (Mr. Darling), who, I think, we hear too rarely in debates on Finance Bills, on the lucid and fair manner in which he criticised this proposal.
Of course, co-partnership and co-ownership schemes are important, and, as I shall show, employers who wish to carry out co-ownership schemes are in a better position in our tax system than is always realised in this Committee. There are two points that I should like to make. First, we in this Committee ought to be very careful not to get into a frame of mind which holds that co-ownership and co-partnership are good things and that, therefore, because this new Clause is about co-ownership and co-partnership we should vote for it. As I shall show, this proposal has some rather serious defects. In discussing this subject, it is wrong to suppose that one can generalise too much about the proper relationship between Government and industry. One thing about which I am absolutely convinced is that words ending in "ism" are apt to be dangerous in considering this matter.
Let me say a word or two about the position of employers under our present law, because it is worth remembering. In the first place, where any scheme consists in the payment of a direct bonus, whether computed by reference to output, dividends or any other way, the bonus ranks as a deduction in computing business profits for Income Tax and Profits Tax. Secondly, if an employer buys shares in the open market for his employees, it depends on the nature of the arrangements whether relief from Income Tax or Profits Tax is due. It was for that reason, among others, that, shortly after Sir Anthony Eden became Prime Minister, in 1955, the present Government offered help from the Inland Revenue to those companies which wished to set up co-partnership schemes. A number of inquiries have been received, but I am told that the problem that a company may not be entitled to a tax deduction has not proved an important discouragement.
Finally—and this is important, too—when employees receive dividends, either on ordinary shares or on special employee shares, the employer recoups himself for Income Tax suffered by reduction from the dividend and is thus left bearing no Income Tax on the dividend. It is quite true that no similar Profits Tax relief is available, but it is worth pointing out—and I promise not to de-

velop the point—that the bringing together of the two Profits Tax rates has proved of assistance.
Since 1958, when Profits Tax was converted into a flat-rate tax on total profits, the complaint that dividends on shares issued under a profit-sharing scheme attracted the distributive rate of Profits Tax has disappeared. When considering this subject, we ought to remember the many ways in which, under our present tax system, it is not so very difficult to introduce and encourage schemes of co-partnership and co-ownership.
Let me now deal with the new Clause which we are discussing. The proposal of the hon. Member for Huddersfield, West is, to some extent, in line with earlier proposals of the Liberal Party in so far as the hon. Member's proposals relate to the treatment of an employer's appropriation towards providing shares under a co-partnership scheme. But the proposals go very much further than that. They are not confined to those employed by concerns with co-owner-ship schemes. They extend to all employees whose employers fall in with the proposed scheme for "Employees' Savings Accounts". They apply not only to shares issued under co-ownership schemes, but to all deposits by employers, whether in the form of shares in the employing concern or other shares or securities or cash.
I quite understand the reason for this rather wider proposal, and the hon. Member explained it fairly when moving the Clause. The development in Liberal Party policy is intended primarily to counter the general criticisms which were often made in the past of proposals that were confined to co-ownership schemes, namely, that such schemes encourage workers to put their eggs in one basket, and some of them might thereby prove a hindrance to the mobility of labour.
It is fair also to say that the hon. Member's scheme met the objections to earlier proposals that they gave an unjustifiable tax advantage to the employees of a company which has a co-ownership scheme as against those who work for a concern which does not have co-owner-ship or those who are self-employed. That is true, and I quite understand the reason for the development of Liberal Party policy. The earlier proposals were relatively limited in their application.


Over the whole field of employers, the number of those able and willing to offer shares to their employees on favourable terms as part of a co-ownership scheme, even given the sort of inducement contained in the Clause. must be in a minority.
Let us see where these new proposals take us. The hon. Member for Hillsborough was fair in making the point that the major effect of the new proposals would no longer be the fostering and encouragement of co-ownership. They are now designed to encourage general investment by allowing special facilities for the building up by employees, or the self-employed, of a fund of invested capital at the rate of up to £100 a year. There are no provisions to ensure that the deposits are used for shareholding rather than for other forms of investment. It is not unfair to say that these new proposals amount to a scheme for fostering saving through a particular form of "bank account."
Although the Clause goes well beyond fostering co-ownership schemes, it can be said that these proposals give us the worst of all worlds, because the kind of savings that are covered are more varied than in past proposals. Even so, the scheme as the hon. Member presented it is far from comprehensive. There are forms of saving at least as meritorious for which it does not provide any tax incentive—for example, saving to buy one's house through a building society, or the ploughing back of profits by a self-employed person in his own business.
That leads us—we cannot avoid considering the Clause in this context—to the whole question of the proper treatment of personal savings for Income Tax purposes. One is bound to go to the view of the Royal Commission in Chapter 3 of its final Report. At the risk of being tedious, I find myself forced to repeat both what the Royal Commission said on that occasion and what my right hon. Friend the Chancellor of the Exchequer said when he replied to a not dissimilar Clause in 1958.
The Royal Commission took the view that saving related to the making of reasonable provision against retirement, death or emergency, could be looked at as a specially deserving category; and for this reason it commended the existing allowances for superannuation and life

insurance. In paragraph 76, the Royal Commission said:
If life insurance relief and the relief for National Insurance contributions are retained, and if superannuation relief is developed to what we regard as its logical conclusion, we think that the tax system will be making as much concession to savings as it is reasonable or proper that it should. However desirable for economic reasons the encouragement of personal saving, measures adopted for its encouragement should lie outside the sphere of the Income Tax system, to the general equitable principles of which differentiation measured by saving is not, as we have said, either easily or closely related.
I quote those words again because there is a great deal of sense and justice in them.
At the risk of wearying the Committee, I must remind hon. Members of what my right hon. Friend said when replying to the 1958 Clause. It applies closely to the Clause that we are discussing.
9.15 p.m.
My right hon. Friend said:
In general, it seems to me that the principle on which we work—and I think it is a sound one—is that Income Tax should fall impartially on all income from all sources, regardless whether that income is spent or saved. The proposal made in the Clause conflicts with that principle. It goes wider than encouraging employee shareholding, because the relief applies to stocks and shares other than the stocks and shares of the employing company. I can only guess the cost, but it might amount to a considerable sum, and though I will always promise to consider any constructive scheme—and this is a constructive scheme—for a good object like this, I am forced to the conclusion that the proposal would prove not only a rather complicated way but also a very expensive way of encouraging personal savings, so it is with some regret that I do not feel able to recommend the Committee to accept the Clause."—[OFFICIAL REPORT, 2nd July, 1958; Vol. 590, c. 1495–6.]
The Leader of the Liberal Party quoted the story of the one-armed lawyer, and perhaps I may be allowed to quote, in return, from F. M. Cornford's "Microcosmographia Academica", the remark that there is only one reason for doing anything and all the rest of the arguments are for doing nothing. The argument for the Clause was fairly put by the hon. Member for Huddersfield, West, but I say with conviction that the hon. Member for Hillsborough and myself between us have put to the Committee some good reasons for not accepting the Clause.
I will not weary the Committee by developing the case at greater length now, but the Government cannot regard the Liberal Party's proposals as sound in this instance. By the way, how convenient it is that by the accident of our Parliamentary conventions the number of signatures which can be accommodated for a new Clause on the Notice Paper is the exact number of the Liberal Party. We much value tonight the presence throughout the debate of the whole of the Liberal Party, except for the hon. and learned Member for Cardigan (Mr. Bowen), who, I know, is indisposed. Otherwise, I am sure that he would have been here.
I do not believe that co-partnership and co-ownership schemes are badly treated under our present tax system. Certainly, one of the main aims of the Government's financial policy remains the encouragement of personal savings, and the success of that policy has been shown by the much higher level of personal savings over the last few years. We believe that personal savings, alongside compulsory savings, have a part to play in increasing the rate of investment without inflation. But, for the reasons I have given, without any prejudice against co-partnership and co-ownership as such, I feel bound to recommend the Committee to reject the Clause

Mr. Holt: It distresses me once again to have this entirely inadequate reply from the Government.

Mr. Darling: It is an inadequate Clause.

Mr. Holt: The hon. Member for Sheffield, Hillsborough (Mr. Darling) has had a great deal to say about the inadequacy of the Clause but not a single point that he raised was a valid criticism of the Clause or of the scheme. The hon. Member had a very flattering reference from the Financial Secretary but I thought that it was unwarranted and I shall be delighted to send him our pamphlet which deals with every point that he raised. The Financial Secretary did not reply to this Clause. He replied to a Clause which is not for discussion today. The one we are discussing makes a perfectly simple point. The hon. Member for Hillsborough can have all the consultation he likes. There is no sug-

gestion that there should not be consultation between employers and employees.

Mr. Darling: It is not in the Clause.

Mr. Holt: The hon. Member misses the whole point. These kinds of schemes will not work in any case in a company which has not a proper employer-employee relationship. These are not schemes which will create out of entirely unsatisfactory conditions a paradise of employer-employee relations. This was made clear by the Leader of the Liberal Party. This is one contribution towards improving relationships between employers and employees. Joint consultation at the highest level is a prerequisite before these schemes can work.
Certainly one of the things which would be discussed between employers and employees and directors of companies would be whether any surplus which was available at the end of the year would be better spent by giving it to employees in the form of shares, so that the money would be retained in the company for its development, or whether it would be better, if the company did not require the money, for it to go out as a bonus to the employees.
To suggest that this is an inadequate industrial charter is beside the point. It is not intended to be an industrial charter. We have had enough of that from the other side, and have seen nothing done about it for ten years. This is a perfectly simple plan to put the giving of shares to employees on the same basis as far as taxation is concerned as the giving of a bonus. That is the simple point, and in order to arrange this with the Inland Revenue, one has to produce a Clause of this kind. I have not heard a single valid criticism today about the details of this Clause. The criticisms are either that we have brought in too many other things in a Clause which we are not actually discussing, or that we have not brought in some other things which it was not our intention to bring in, and which have nothing to do with the subject under discussion.

Mr. John Diamond: Will the hon. Gentleman explain what he means? He has just said that this is meant to put it on all-fours with a bonus for tax purposes, but when a company


pays a bonus, the recipient does pay tax on it. Is he suggesting that the recipients of shares under this scheme should pay tax on the nominal value of the shares, or what does he mean?

Mr. Holt: I am referring, not to a weekly bonus, which probably has already been arranged through the negotiating channels, but to a bonus which a company may pay at the end of its year.

Mr. Diamond: To its employees?

Mr. Holt: Yes, to its employees.

Mr. Diamond: But that pays tax.

Mr. Holt: That is the whole point. It does not pay tax.

Mr. Diamond: It does. The hon. Gentleman should go and learn some-think about it.

Mr. Holt: If the hon. Member for Gloucester (Mr. Diamond) would read this Clause and get himself in order, he would realise that the whole discussion was about employers. The other Clause deals with employees, and that has not been discussed today. The Clause we are discussing deals with companies and their tax position. That is the situation, and if the hon. Gentleman wants to have that explained to him, he will find that it was very carefully explained when we debated this matter on 25th June. 1956. If he will look at the speech which I then made, which he will find in col. 198 of HANSARD, he will see the whole thing simply laid out with facts and figures.
I do not wish to delay the Committee much longer, because it is quite apparent that we are going to get nowhere with the Government, in spite of the fact that, in 1955, when Sir Anthony Eden, then the Leader of the Labour Party—[HON. MEMBERS: "Oh."]—that was a slip, but I think it was probably very appropriate, because he was talking about nationalisation and said that nobody now believed in it, and that something else was required. He said that the idea behind nationalisation was that one should en

deavour to bring into industry a spirit of co-operation which was motivated by something other than profit. That is excellent, but although nationalisation is now widely accepted as something which should not be developed further since it has not in fact brought such a spirit, that does not mean that we should cease to try to find other ways in which we can adjust or improve private enterprise so as to bring that kind of spirit into it.

I think that that can be done by encouraging a spirit in industry in which people recognise their responsibilities and recognise that they are becoming involved. One of the ways of doing that—and I stress that it is only one of the ways and is not a way which necessarily interests everbody, but is a way which interests some—is to encourage and facilitate more ownership in that industry. That is the simple point which we are trying to make in the new Clause.

It is time that both the Government and the Opposition paid more attention to this subject in detail. Apparently, they do not approve of this method, but it is then up to them to produce some other tangible alternative. Something will have to be done. The situation cannot be left as it is. Nobody can pretend that the present climate of industry is satisfactory or that it should not be altered. It will be altered. There will be changes in industry and in the structure of the relationship between employers and employees. As nationalisation is out for most of the private sector of industry, we want to know what the other two parties' alternatives are if they do not support this proposal.

Mr. Wade: I do not propose to reply to the observations of the Economic Secretary. I merely say that I was interested in his remarks, but very disappointed. In effect, he said that the Government are not prepared to accept this or any similar new Clause.

Question put, That the Clause be read a Second time:—

The Committee divided: Ayes 3, Noes 234.

Division No. 116.]

AYES
[9.28 p.m.


Davies, Rt. Hn. Clement (Montgomery)
Thorpe, Jeremy
TELLERS FOR THE AYES:


Grimond, J.

Mr. Wade and Mr. Holt.




NOES


Aitken, W. T.
Gibson-Watt, David
Nugent, Sir Richard


Allason, James
Glover, Sir Douglas
Oakshott, Sir Hendrie


Amory. Rt. Hon. D. Heathcoat (Tiv'tn)
Glyn, Dr. Alan (Clapham)
Orr-Ewing, C. Ian


Ashton, Sir Hubert
Glyn, Sir Richard (Dorset, N.)
Osborn, John (Hallam)


Atkins, Humphrey
Goodhart, Philip
Osborne, Cyril (Louth)


Barber, Anthony
Goodhew, Victor
Page, A. J. (Harrow, West)


Barlow, Sir John
Gower, Raymond
Page, Graham


Barter, John
Grant, Rt. Hon. William (Woodside)
Pannell, Norman (Kirkdale)


Batsford, Brian
Green, Alan
Pearson, Frank (Clitheroe)


Baxter, Sir Beverley (Southgate)
Gresham Cooke, R.
Peel, John


Beamish, Col. Tufton
Grosvenor, Lt.-Col. R. G.
Percival, Ian


Bennett, F. M. (Torquay)
Hamilton, Michael (Wellingborough)
Peyton, John


Berkeley, Humphry
Harris, Frederic (Croydon, N.W.)
Pickthorn, Sir Kenneth


Bidgood, John C.
Harris, Reader (Heston)
Pilkington, Capt. Richard


Biggs-Davison, John
Harrison, Brian (Maldon)
Pott, Percivall


Bingham, R. M.
Harrison, Col. J. H. (Eye)
Powell, J. Enoch


Birch, Rt. Hon. Nigel
Harvey, John (Walthamstow, E.)
Price, David (Eastleigh)


Bishop, F. P.
Henderson, John (Cathcart)
Prior, J. M. L.


Black, Sir Cyril
Hendry, Forbes
Prior-Palmer, Brig. Sir Otho


Bossom, Clive
Hicks Beach, Maj. W.
Profumo, Rt. Hon. John


Bourne-Arton, A.
Hiley, Joseph
Ramsden, James


Box, Donald
Hill, Mrs. Eveline (Wythenshawe)
Rawlinson, Peter


Boyd-Carpenter, Rt. Hon. John
Hill, J. E. B. (S. Norfolk)
Redmayne, Rt. Hon. Martin


Boyle, Sir Edward
Hirst, Geoffrey
Rees, Hugh


Braine, Bernard
Holland, Philip
Rees-Davies, W. R.


Brewis, John
Hopkins, Alan
Renton, David


Bromley-Davenport, Lt.-Col. W. H.
Hornsby-Smith, Rt. Hon. Patricia
Ridley, Hon. Nicholas


Bryan, Paul
Howard, Gerald (Cambridgeshire)
Roberts, Sir Peter (Heeley)


Bullus, Wing Commander Eric
Howard, John (Southampton, Test)
Roots, William


Burden, F. A.
Hughes Hallet, Vice-Admiral John
Ropner, Col. Sir Leonard


Butcher, Sir Herbert
Hughes-Young, Michael
Scott-Hopkins, James


Butler, Rt. Hn. R. A.(Saffron Walden)
Hutchison, Michael Clark
Sharples, Richard


Campbell, Gordon (Moray &amp; Nairn)
Irvine, Bryant Godman (Rye)
Shaw, M.


Carr, Compton (Barons Court)
Jackson, John
Skeet, T. H. H.


Carr, Robert (Mitcham)
James, David
Smith, Ellis (Stoke, S.)


Cary, Sir Robert
Jenkins, Robert (Dulwich)
Smyth, Brig. Sir John (Norwood)


Chataway, Christopher
Jennings, J. C.
Spearman, Sir Alexander


Clark, Henry (Antrim, N.)
Johnson, Dr. Donald (Carlisle)
Speir, Rupert


Clark, William (Nottingham, S.)
Johnson, Eric (Blackley)
Stevens, Geoffrey


Clarke, Brig. Terence (Portsmth, W.)
Jones, Rt. Hn. Aubrey (Hall Green)
Steward, Harold (Stockport, S.)


Collard, Richard
Kerans, Cdr. J. S.
Stodart, J. A.


Cooper, A. E.
Kerby, Capt. Henry
Stoddart-Scott, Col. Sir Malcolm


Cooper-Key, Sir Neill
Kimball, Marcus
Storey, Sir Samuel


Cordeaux, Lt.-Col. J. K.
Kirk, Peter
Studholme, Sir Henry


Cordle, John
Leather, E. H. C.
Summers, Sir Spencer (Aylesbury)


Corfield, F. V.
Leavey, J. A.
Sumner, Donald (Orpington)


Costain, A. P.
Legge-Bourke, Maj. Sir Harry
Talbot, John E.


Coulson, J. M.
Lewis, Kenneth (Rutland)
Tapsell, Peter


Courtney, Cdr. Anthony
Lilley, F. J. P
Teeling, William


Craddock, Sir Beresford
Lindsay, Martin
Thomas, Leslie (Canterbury)


Critchley, Julian
Linstead, Sir Hugh
Thomas, Peter (Conway)


Crosthwaite-Eyre, Col. O. E.
Litchfield, Capt. John
Thompson, Kenneth (Walton)


Crowder, F. P.
Longbottom, Charles
Thompson, Richard (Croydon, S.)


Cunningham, Knox
Longden, Gilbert
Thornton-Kemsley, Sir Colin


Curran, Charles
Loveys, Walter H.
Tiley, Arthur (Bradford, W.)


Currie, G. B. H.
Low, Rt. Hon. Sir Toby
Tilney, John (Wavertree)


Dance, James
Lucas-Tooth, Sir Hugh.
Turner, Colin


d'Avigdor-Goldsmid, Sir Henry
McAdden, Stephen
Turton, Rt. Hon. R. H.


Deedes, W. F.
MacArthur, Ian
van Straubenzee, W. R.


de Ferranti, Basil
McLaren, Martin
Vane, W. M. F.


Donaldson, Cmdr. C. E. M.
McLaughlin, Mrs. Patricia
Vickers, Miss Joan


Doughty, Charles
MacLeod, John (Ross &amp; Cromarty)
Wakefield, Edward (Derbyshire, W


Drayson, G. B.
McMaster, Stanley R.
Ward, Dame Irene (Tynemouth)


du Cann, Edward
Macpherson, Niall (Dumfries)
Watts, James


Duncan, sir James
Maddan, Martin
Wells, John (Maidstone)


Elliott, R. W.
Maginnis, John E.
Whitelaw, William


Emery, Peter
Markham, Major Sir Frank
Williams, Paul (Sunderland, S.)


Emmet, Hon. Mrs. Evelyn
Marlowe, Anthony
Wills, Sir Gerald (Bridgwater)


Errington, Sir Eric
Marshall, Douglas
Wilson, Geoffrey (Truro)


Farey-Jones, F. W.
Marten, Neil
Wise, A. R


Farr, John
Matthews, Gordon (Meriden)
Wolrige-Gordon, Patrick


Finlay, Graeme
Maudling, Rt. Hon. Reginald
Woodhouse, C. M.


Fisher, Nigel
Mawby, Ray
Woodmitt, Mark


Fletcher-Cooke, Charles
Maydon, Lt.-Cmdr. S. L. C.
Woollam, John


Fraser, Hn. Hugh (Stafford &amp; Stone)
Montgomery, Fergus
Worsley, Marcus


Fraser, Ian (Plymouth, Sutton)




Freeth, Denzil
Morgan, William
TELLERS FOR THE NOES:


Gammans, Lady
Mott-Radclyffe, Sir Charles
Mr. Brooman-White and


Gardner, Edward
Neave, Airey
Mr. Chichester-Clark.


George, J. C. (Pollok)
Noble, Michael

New Clause.—(ABOLITION OF SCHEDULE A INCOME TAX.)

Where the total income of an individual includes or would, but for this section, include any sum under Part III of the Income Tax Act, 1952, in respect of a house or tenement of which the said individual is owner, the sum aforesaid shall be disregarded for all the purposes of the Income Tax Acts other than the furnishing of information.—[Mr. Wade.]

Brought up, and read the First time.

Question, That the Clause be read a Second time, put and negatived.

New Clause.—(PURCHASE TAX: REDUC TION OF RATE FROM 12½ TO 5 PER CENT.)

Subject to any order made by the Treasury under section twenty-one of the Finance Act, 1948, Part I of the Second Schedule to the Finance Act, 1958 (as amended by the Finance Act, 1959), shall be amended by the substitution in the percentage rates of tax specified throughout that Schedule of the figure 5 for 12½.—[Mrs. Slater.]

Brought up, and read the First time.

Mrs. Slater: I beg to move, That the Clause be read a Second time.
The Committee has had one debate on a new Clause relating to Purchase Tax during which the hon. Member for Kidderminster (Mr. Nabarro) said that its provisions related to 100 per cent. of the people concerned. I can truthfully say that the provisions in this Clause relate to matters affecting 100 per cent. of the people of this country. The Clause deals with many of the commodities which were taxed when the right hon. Gentleman the Home Secretary, as Chancellor of the Exchequer, introduced his "pots and pans" Budget in which many household commodities were subjected to tax for the first time.
Originally, Purchase Tax was introduced to restrict the purchase of goods which, in the main, we wanted to export, but today Purchase Tax has become such an easy method of raising revenue that it has now been extended to almost everything we use. In this section many items are affected. It does not include electric sweepers, but it includes non-electric carpet sweepers, kitchen scales, personal weighing scales, wringers, mangles, cutlery, knives, spoons, slicers, fish servers, wallpaper, tiles, linoleum, hardware if not used for industrial purposes, coal bunkers, dustbins, mats, baking tins, bread bins and food storage jars. All those things come within the

section on which the amount of tax is 12½ per cent. at present.
Naturally, my hon. Friends and I are interested in pottery and that comes within the section on which 12½ per cent. is paid. The pottery industry produces about £60 million worth of goods annually. Some may say that it is not a very large industry, but it is a very important industry. It is important because a large proportion of the pottery which is produced and has been produced in this country over the years is exported and therefore brings income to the country. I believe that even now we are the largest European exporters of pottery. Yet, although we produce such lovely china and beautiful pottery of all kinds, half the families of this country own only one dinner service and just over half possess only one tea service. On average, only £1 a year is spent on pottery by a family.
That is distressing, not only from the point of view of the industry, but because the ordinary people do not spend more on beautiful china on which to eat their food and beautiful vases to be used in their homes. The fact that half our people do not possess necessary china is just not good enough.
We believe—this applies not only to pottery but to many other household commodities—that the ownership of good china is not a luxury but a necessity. To possess unchipped and sound pottery, especially when it is used for eating purposes, is healthy. It is unhealthy to use chipped pottery. I wish that that was realised more in this House of Commons and that when crockery became chipped it was thrown away. The use of good china has an aesthetic value.
If the Financial Secretary had been present, I could have reminded him that he has eaten food off the lovely civic china of Stoke-on-Trent of which we are extremely proud, for it is the best in the world. The Economic Secretary to the Treasury has seen some of that lovely china during the visit which he has made to Stoke-on-Trent, and I am sure that he agrees with me that to have food served on china of that quality makes a meal very much more enjoyable than if it is served on old earthenware and undecorated pottery. We therefore believe that there is an aesthetic value


in having about us, and using for the serving of our food, beautiful china and good, unchipped pottery. Any restriction, such as Purchase Tax at 12½ per cent., ought not to be tolerated, even if it restricts in only a very small way the purchase by the ordinary people of this country of some of that china which is produced in our district.
9.45 p.m.
About three weeks ago in Stoke-on-Trent we had a pottery exhibition for our jubilee year celebration. Most of our pottery firms displayed their wares in that exhibition. We had on show not only china which had been produced for people in this country but some which we had borrowed from wealthy countries abroad. The exhibition also included a display of the modern tiles which are produced for bathrooms and kitchens. I cannot describe that display here tonight, but it showed the great variety and the great beauty of the wares produced in our city.
The industry feels very sore about the continuation of Purchase Tax at 12½ per cent. It is meeting very severe competition from both European and other countries. We still believe that we produce the best, but the competition exists.
During the post-war years the industry has endeavoured to meet that competition not only for itself but for the sake of the country. It has modernised its designs and its methods of producing pottery and tiles. It has tried to rationalise the industry, as far as that can be done in pottery, which is so much a craft industry. In addition, in order to comply with the Clean Air Act the factories have been modernised by introducing tunnel-oven firing rather than the old-fashioned bottle oven. All that has put an added expense on the industry, which feels that this further injustice of a 12½ per cent. Purchase Tax is one from which it ought to be relieved.
I speak on this section of Purchase Tax not only from the point of view of the industry which I am proud to represent but also from the point of view of the housewives of this country. They are almost the only people who can say that the tools of their industry suffer tax of this kind. All kinds of people have had this tax removed because they use these

articles in industry. Even the buckets used by the butcher do not bear tax, but the bucket which the housewife uses does bear tax. Almost everything that the housewife has to use bears this tax. If she wants to decorate her house, as all housewives do, she pays tax on the wallpaper. If housewives want to lay new linoleum or buy a new carpet, they have to pay tax. It is good for our souls as well as other things to have something new about the house. Housewives have pulled their weight and should rank with other workers in being relieved of this heavy taxation on every commodity which they wish to buy.
Therefore, the Economic Secretary and his right hon. Friend should come down to earth upon this Clause and give us some consolation by agreeing to it.

Dr. Barnett Stross: The Economic Secretary will probably have refreshed his mind by looking up the debate following the imposition of this iniquitous tax in October. 1955. If he has, he will agree with me that the then Chancellor of the Exchequer made it very clear when we pressed him that he could not justify his action in terms of logic. The right hon. Gentleman said that that which he did was not logical and he could not so defend it, but he pointed out that at that time he had to have the money and take away purchasing power from the people and prevent them spending money. We were amongst the other victims.
The right hon. Gentleman said that the tax would produce £7 million. We warned him then that he would not get £7 million because he would damage the future and the structure of the industry. We were right. The yield was £5½ million in a full year. The right hon. Gentleman did not get £7 million because what we had pleaded for was of no avail and what we had warned him of came true.
We lost craftsmen and suffered a good deal of short time. There was a contraction of the industry as a whole. Since then, the situation has become clear to the Treasury, because it has cut Purchase Tax, on the goods we are describing, including pottery, first to 15 per cent. and last year to 12½ per cent.
We are fully justified in pleading for a further reduction to 5 per cent., and our case is strong. One can say three


things quite explicitly. Of all large-scale industries in this country or in the world, the craft of pottery-making is still more dependent upon the craftsmen than any other. The prime tool of the industry is still the hand of the potter. Lost craft labour in an industry like this is irreplaceable. It never comes back.
I say with sorrow that one of the reasons why lost workers do not come back is that our industry is not without its dangers to health. In recent years much money has been spent by employers, both on research and on carrying out the advice their own research organisations, the Factory Inspectorate and the union have given them, but it is not an entirely healthy industry. If an employer loses craft labour which it has taken half a lifetime to train well, he does not get it back. It is not only the industry that suffers, but the country as a whole. The impact of Purchase Tax causes a loss of craft labour and brings us short working time, which means the degradation of the standard of living of our workers.
First, we ask the Economic Secretary and his right hon. Friend to reduce this tax to our suggested 5 per cent. Second, we point out to him that the Treasury is guilty not only of imposing a tax to our detriment but of making its announcements at the wrong time of the year to suit the industry. We have pleaded about this for a long time, and only once have our pleas been listened to. From the present Home Secretary, who imposed what at that time was a 30 per cent. tax, we received some relief when he announced taxation changes in January and not at the time of the Budget. An announcement of changes at the beginning of the year means that we do not get stagnation for three months while the shopkeepers and traders wait to see which way the wind will blow.
Restrictions on credit were eased very considerably in 1959, and the trade then expected, but did not get, some modifications. If he has not the figures with him, the Economic Secretary will be interested to know that, as a result, in the first three months of last year as compared with the same period in the previous year our trade was £½ million less. I will not stress that point any more because I have a very strong

suspicion that representations on this have already been made to the hon. Gentleman and that he is aware of them.
From time to time, a review of the industry is made in order to see what is happening to the workers, to profits, to stocks and to orders. Eighty-eight firms are normally consulted, and the result of the review shows that in January of this year as compared with the number in October, 1955, there were 1,000 fewer males at work and nearly 2,000 fewer females. In January of this year, 769 males and 1,534 females were on short time, while the stock position was one of the highest on record, with the warehouses bursting with stock.
I do not want the Economic Secretary to think that I am crying "Woe" all the time about the industry. Despite all the onslaughts of competition from abroad, of new pottery industries being created in parts of the world that never made pottery before, and which, naturally, wish to protect their own industries; in spite of all the difficulties, and the enmity of the Treasury—and the Treasury is our enemy here—the industry has faced its difficulties very well, and is doing very well at the moment as compared with what one might have expected in view of what I have said.
When we consider that we are still able to export 45 per cent. of our ware in spite of quotas against us in almost every country in the world except the United States, the hon. Gentleman will realise that I appreciate that we are not impoverished at the moment. Nevertheless, this is a most vulnerable industry, and it is one that should be kept alive. We should not wait until it is moribund, nor do we expect a stab in the back from those whom we should have as friends—the Treasury.
We answer all our problems and difficulties in two ways, by rationalisation on the one hand, and by improvement in design and shape on the other. Our patterns and shapes in the post-war period are magnificently good compared with pre-war. I remember reading in the Encyclopaedia Britannica many years ago that nothing significant in shape or design in the pottery industry had been noted since 1800. That was the 1924 edition of the Encyclopaedia. Today, even some of our undecorated ware is a joy to look at, competing very well with


the most plastic and malleable of metals like silver and gold. If the hon. Gentleman has not seen them in our area, we shall be very glad to show him examples.
10.0 p.m.
The wages bill of every manufacturer is essentially the biggest section of his expenses. I think that it is a little over 50 per cent. of all costs because of the craftsmanship in the industry. Despite that, we have introduced every kind of scientific aid into the industry in a way which I would not have thought possible in 1938 or 1939. But there is a limit and we think, although we shall go on defending ourselves as best we can, that we face very serious competition.
I do not wish to offend friendly and charming people but I do not think that the standard of life of the workers in Italy is as high as ours and I think the same is true of Western Germany; it is certainly true of Japan. We feel that we should have more sympathy for any pleas of this kind which we make, in one form or another, year after year.
Finally, I would say that this, the most modern and efficient industry of its type in the world, which employs the largest number of people working in the craft anywhere in the world—50,000 men and women work in our city—was a low-profit industry before the war. It is not a low-profit industry today, but it has ploughed back a tremendous percentage of its profits in order to survive in the post-war years. I think it is true that it is very vulnerable and therefore we appeal for some sympathy and understanding of our problem.
I do not think that the Economic Secretary, his right hon. Friend or anyone in the Committee wants to see the potteries suffer the fate of such contraction as has happened to the cotton industry in Lancashire. It is not in such a low state as all that. Perhaps it has been luckier than the cotton industry. There is not so much competition and the craft is not so easily learned in other parts of the world and, even where they are learning the craft, they are unable to produce the quality of body, design and shape that we do. I hope that tonight we shall hear from the Economic Secretary that he understands our problems, that he will agree that the changes in Purchase Tax ought to come in January

and not in May or June, and that the claim we make for a reduction from 12½ per cent. to 5 per cent, is a very modest request.

Mr. Ellis Smith: My hon. Friends the Members for Stoke-on-Trent, Central (Dr. Stross) and Stoke-on-Trent, North (Mrs. Slater) have made a reasoned and unanswerable case in support of this Clause. In addition, they have substantiated their case by direct evidence arising out of their close contact and experience of the industry. I want to make a few observations in support of the fine case which they have presented.
The proposal in the Clause is that there should be a reduction in Purchase Tax to 5 per cent. In my view, it should be abolished altogether. To be in order I propose to keep within the limits of the Clause. I cannot understand any political party in these days being a party to the continuation of a restrictive tax upon the export industry. I was in at the birth of the imposition of Purchase Tax. In the private meetings of the Labour Party a great battle took place in which we reasoned with one another, as we ought to be doing tonight, in order to come to a democratic and mutually acceptable correct conclusion.
As a result of pooling our ideas, our party, by an overwhelming majority, decided against Purchase Tax. Let me make it clear that we were prepared in those days to agree to anything to win the war. But we thought that the proposed method of restricting consumption was not fair and we suggested that the object should be achieved by more scientific methods. However, the party eventually bowed to the proposals of the Coalition Government, with the result that Purchase Tax was imposed to restrict consumption.
I am sure that the Financial Secretary will agree that the purpose of Purchase Tax is now revenue raising. Upon that I am not "going off the deep end" to say this, that and the other. It would be so easy to do that. But, having regard to the constant appeals made by the Chancellor and other Ministers to the National Joint Advisory Conucil, which meets quarterly to consider the best course for this country to adopt to further our export trade, I should think


that all restrictions on the export industries should have been removed before now.
It is admitted by all well-informed people that, relatively speaking, the pottery industry since 1945 has made an enormous contribution to this country's exports. I think that those exports could be greatly increased if we were to set about the matter. This country is now in such an economic position that we can no longer rely upon our income from investments abroad. Therefore, it is necessary that we should have the maximum exports so that we can not only maintain our present position but improve upon it.
If that is correct reasoning, then long before now all restrictions like Purchase Tax should have been removed. Is that fair reasoning? Is it correct reasoning? I suggest that my reasoning up to now has been in complete harmony with the economic policy constantly put forward by the Chancellor of the Exchequer. I have in my possession notes which I could produce, if anyone expressed doubt, showing that at meeting after meeting the Chancellor has pleaded with the trade unions and the employers to maximise exports. We all agree about that—

The Temporary Chairman (Sir Norman Hulbert): Order. I hope that the hon. Member will endeavour to relate his argument to the proposed new Clause and not wander over the whole economic field.

Mr. Ellis Smith: I should have thought that that is what I have been doing from the beginning of my speech, Sir Norman.
I was hoping that tonight we would have had an undertaking so that we in this Committee could take steps, in harmony with the Chancellor's proposals, to remove Purchase Tax. We are not speaking for ourselves alone. We are Labour Members. We are real, uncompromising Labour Members. We are not trying to ride two horses. But we are also speaking for the manufacturers. I have documents which have been prepared by the manufacturers who are the political friends of the Financial Secretary and the Economic Secretary. Time after time they have taken part in deputations to the Chancellor.
Minister after Minister has visited the City of Stoke and has been taken round the finest pottery factories not only in the country, but in the whole world. They have gone to—what do they call them?—lunches and dinners, and they have talked about this, that and the other, but nothing has been done. Only a few weeks ago, my right hon. Friend the Leader of the Opposition went there. He gave an assurance, which we are trying to fulfil—if he were here he would be supporting us 100 per cent.—that it is time that the Purchase Tax on pottery was removed.
As my hon. Friend has said, we are subject to keen competition. It is quite unfair that an industry catering for the export trade to the extent that our industry is should be subject to restrictions of this kind, particularly when it is in competition with other countries such as Japan. Moreover, in an industry of this kind, it is necessary that there should be a thriving home market. Year after year, the manufacturers try out new designs and new methods of production. It is essential that research should be taking place all the time. To cater for development based upon research, together with new methods of production and decoration, it is necessary that the products should be tried out in the home market. If people stand in admiration of them, as they do, then in that way we can build up a greatly increased and thriving export trade.
Those are the reasons why we are so keen to have this change accepted. I do not think that the Economic Secretary has yet visited our city, but we have hopes of him also visiting us. We shall give him a great welcome if he does come.

Dr. Stross: And a tea service.

Mr. Ellis Smith: If they do him as well as they did my right hon. Friend the Leader of the Opposition, he will do well. If he has any doubts about his possible experiences, let him consult those who have gone. I will go through them—the President of the Board of Trade, the Prime Minister. I do not think that the Chancellor—

The Temporary Chairman: Order. There is nothing in this new Clause to suggest whom the Economic Secretary should consult before he goes to the hon. Member's constituency.

Mr. Ellis Smith: I agree, Sir Norman. I am very sorry. I do not think that you have yet visited the city, so we will invite you as well.
For the time being, I am dealing with the Economic Secretary. I hope that he admits that we have made out a reasoned case. If he agrees that it is reasonable, then, if he cannot accept a reduction in Purchase Tax tonight, will he give an undertaking that, between now and the next opportunity which presents itself, he will use all the influence he possibly can within the Treasury to see that the tax is abolished altogether?

Mr. Harold Davies: I have not with me a brief from the manufacturers. I would rather not have it, because the meticulous case they put forward might delay the Committee too long. Hon. Members opposite look tired and a bit bored. I assure them that I shall not speak for very long, but I hope that the Committee will listen to me for a few minutes.
There are other factors to be mentioned in this connection. It may seem strange that I, the Member for Leek, should be supporting the pottery industry, but, before my division was redistributed and about 26,000 industrial workers were taken out of it, including many in a large section of the pottery industry, much of that wonderful part of North Staffordshire was in the Leek constituency. I know very well that more than mere economics is involved in the pottery industry.
I ask the Committee to remember that one of the finest ambassadors of British greatness, before ever we had the steam engine, was the pottery industry. I have been there many times, but on one occasion when I was in the Hermitage Museum in Leningrad I had the exquisite pleasure of examining the famous Green Frog ware produced by the old, great Wedgwood. Incidentally, one of his relatives fought me at the last election and, despite the redistribution, he is not in the House of Commons today. I had the exquisite pleasure of examining this example of great British craftsmanship turned out by the great Josiah for the Empress Catherine. The pottery industry was the ambassador of Britain long before the engineering industry. Britain was fortunate. We had 289 steam engines before the rest of the

world had any. But, through the pottery industry, we were able to demonstrate to the world the craftsmanship of the British people.
10.15 p.m.
My hon. Friends who represent Stoke-on-Trent are perfectly right. The Treasury seems to treat the City of Stoke-on-Trent like B.B.C. television, which gave an account of the "white country" the other day which annoyed many authorities in Stoke and the local people. North Staffordshire is not an area to be treated with jocularity, nor, I assure the House of Commons, is the division of Leek.
With all due deference to your Ruling, Sir Norman—and I would not dream of questioning it—my hon. Friend the Member for Stoke-on-Trent, South (Mr. Ellis Smith) was making a reasoned case for the export trade in the pottery industry. If we want money for overseas investment, and if we want to balance our trade, we must get it from where we can. The case against Purchase Tax 'has been made out by my hon. Friends. There is not the slightest doubt that this imposition on the pottery industry limits its dynamism to capture foreign markets. Where is the business acumen of the Tory Party which says, "You have never had it so good"? If hon. Members opposite call this business acumen, the sooner they come over to this side of the Committee and let us get over to that side the better.
Because of the world in which we live, it is not quite true to say that "we have never had it so good". The Government are not as much interested in propaganda tonight. They are a little more reasonable and sensible than they were at the hustings. The Government did not mean that "we have never had it so good". They meant that "we have never had it so rich". The trouble with the modern world is that we have never had it so noisy and so ugly. In some cases, never has taste been so low, and we should aim to uplift it. If we look at the modern education that both sides of the Committee are endeavouring to give to the young school girl—

The Temporary Chairman: I must ask the hon. Member to deal with the proposed reduction of Purchase Tax suggested in this new Clause.

Mr. Davies: The taste of the modern young housewife today, through her education, is such that she wants in her home things of beauty.
A thing of beauty is a joy for ever",
and a thing of beauty from the pottery industry cannot be produced at a price which the housewife can afford to pay if this tax is imposed upon it. Of course I am in order, Sir Norman. That is what I am driving at. The taste which has been developed as a result of the educational efforts of both sides of the Committee and which has been inculcated into the young housewife is being frustrated by the Tory Party which says "You have never had it so good". I appeal to the Government to give the housewife the chance to develop that taste by allowing the rich products of the pottery industry to get on to the tables of Britain at a price which she can afford to pay.
We were told today by a Conservative Member below the
Gangway that American industry pays better wages than the captains of industry in Britain. I appeal to the Government to give the industry the chance to spread throughout the land so that its exquisite products can increase our standard and taste. The wonderful standard of design, the craftsmanship of the children in the school of Stoke-on-Trent, their art, their knowledge of painting and their drawing have to be seen to be believed. I am not making a sentimental case, but this great tradition which has been inherited over the centuries is something which could be lost. It would be tragic if either party were to do anything which had that result. We on this side attacked my own party about this when we were in power. Whoever the advisers in the Treasury are, they are just as dense in advising my party as they am in advising the party which is now in power. We attacked our own Government about this.
I appeal to somebody, somewhere, to have a little sense and to realise the needs of this industry, which has given a great name to Britain. Great families have built up the tradition of the industry. Surely, a sensible approach should be adopted.
Since I have lived in the area, as I have done for many years, it has been my tendency to turn over cups and

saucers all over the world. It is a thrill to do so. I remember occasions in Tientsin and in Bangkok and once in Saigon, when I turned over a beautiful cup and saucer to see where they were made. I do not want to advertise any firm; I am not looking for a free dinner set. It was made somewhere in the city of Stoke-on-Trent by a great firm which had put all it knew into the industry. We beg the Committee to consider this industry and this time, at least, to give the housewives a chance to have decent pottery on the kitchen and dinner tables of Britain.

Mr. Loughlin: I do not want to delay the Committee long, or to impinge too much upon the time of hon. Members who represent the Potteries constituencies. or even of my hon. Friend the Member for Leek (Mr. Harold Davies), who used to represent a pottery constituency until redistribution and now represents Leek proper. There are, however, other commodities involved in the tax about which something should be said. In the main, the commodities are those required for the housewife in the kitchen.
In introducing the Clause, my hon. Friend the Member for Stoke-on-Trent, North (Mrs. Slater) referred to the differences betwen the tax on industrial buckets and the tax on buckets used by the housewife. I appeal to the Economic Secretary to the Treasury to do something to assist the housewife in the purchase of these articles. We hear a great deal about the workpeople "never having it so good", but it is always well to remember that vast sections of our industrial workers are not having it quite so good as some people seem to think.
Even in the age in which we live, with all its prosperity, there are housewives whose husbands still have terminal wage rates of £8 10s. to £9 10s. a week. When taxation policy is being considered, it is this section of the community who should be given the greatest consideration.
It is incumbent upon the Government to examine whether it is absolutely necessary to tax articles which are described as tools of the trade of the housewife, particularly among that section of housewives who have to manage on wage rates which, under any examination, are not high enough to maintain a decent standard of life. Examination of the Clause should be related not merely to the


pottery industry, but to those other commodities about which so little has been said in the debate.

Mr. Darling: In spite of the excellent appeals made by my hon. Friends on behalf not only of the pottery industry, but of household commodities as well, I am sure that the Economic Secretary will say that he cannot accept the Clause because Purchase Tax brings in £530 million a year and the Chancellor wants the whole of that and will not make any concessions. But, as my hon. Friend the Member for Gloucestershire, West (Mr. Loughlin) has said, if one leaves out luxury items and one refers only to those covered in the Clause, it will be found that the burden of the tax falls in the main on ordinary housewives, on the people with small or middle incomes.
To the extent to which their purchases are taxed, their purchasing power is reduced, or, to put it the other way round, these people, the poorest in the community and also those with middle incomes, have to bear the burden of this taxation and in doing so have their living costs pushed up, even though they are the very sections of the community who need most help in this direction.
My hon. Friends have spoken about pottery, but from a constituency angle I could refer to cutlery, which is also covered by the Clause. Here is a craft industry the output of which is declining. Its overseas trade has been hit not only because of the difficulties which the industry encounters as a result of Purchase Tax, but also for other reasons. Leading manufacturers engaged in the cutlery industry will say that the main reason why they are in difficulties and output is declining is that ordinary housewives are sticking far too long to the canteen of cutlery given to them as a wedding present, because the cost of replacing cutlery is far too high when it carries the Purchase Tax which is now imposed upon it.
My hon. Friend the Member for Gloucestershire, West referred to other items in addition to pottery and cutlery which come within the range of the tax we are discussing. I would point out to the Economic Secretary what this tax means to the people whom the Government tell us they want to help, the people

who set up homes, the property-owning democracy. When they marry, whether they live in a rented house or a flat or purchase a home, they have to buy carpets and rugs and put paper on the walls. They have to buy furniture, baking tins, bread tins, pots and pans, teapots, cups, plates, tumblers. They have to buy—if they can afford them—a refrigerator, a vacuum cleaner, a washing machine, electric fires, carpet sweepers and spin driers. If they have a garden they want a lawn mower. They also want a television set and a radio. All these things come within this range of tax.
Therefore. what the Conservative Party is doing is going round the country putting up posters before an election saying, "You never had it so good" and making speeches to the effect that they want to develop the idea of a property-owning democracy and then, immediately they are in power, putting a financial imposition on those who want to set up homes so that they can enjoy the circumstances of a property-owning democracy. We think that for these reasons this range of taxation is very unfair.
10.30 p.m
These impositions fall particularly an young married couples who are setting up home, and this means a gross discrimination in the imposition of taxation generally. The fact that the tax falls on those people with small incomes is completely at variance with the principle of sharing the burden of taxation according to ability to pay, for people setting up their homes cannot avoid this tax. It has nothing to do with the amount of income they have; it is levied on their need for the things that they have to buy to set up their homes. This is a tax burden falling on the shoulders of the less well off.
The time has come to find other and fairer sources for the tax income that the Chancellor needs. This burden should be taken from the shoulders of the less well off by reducing the tax now levied upon their domestic necessities.

Mr. Barber: First, I should like to say to the hon. Gentleman the Member for Stoke-on-Trent, South (Mr. Ellis Smith) how grateful I am for his invitation to visit his city. I would have accepted it tonight with alacrity. But my only hesitation arises from the fact that I was


not sure whether it would be prudent to follow so soon in the steps of the Leader of the Opposition. However, I shall certainly remember what he said.
I would say at the outset that I think that one aspect of this debate, which has been very noticeable, is that everybody who has spoken, from the beginning to the end, has done so in most moderate terms. I myself felt that what they had to say was all the more persuasive for that.
The hon. Gentleman the Member for Sheffield, Hillsborough (Mr. Darling) said he expected that I should once again have to advise the Committee to reject this new Clause, and I must do that. I realise, of course, from looking at the list of the signatories to the new Clause, that it is essentially concerned with pottery, and I realise full well that the moving of the new Clause was [the only way in which they could bring about this discussion.
But the products embraced within the Clause are estimated to yield in this financial year £37½ million. They include floor coverings, which are estimated to yield £18 million; domestic hardware, kitchenware, tableware, including pottery, at £12 million; cutlery, spoons, forks at £2 million; domestic appliances at £2½ million; wallpaper at £3 million; making £37½ million in all. The cost of this proposed reduction, if the Clause were taken literally, although I appreciate its motive, would be about £23 million in a full year, and the Committee will appreciate that, on that ground alone, my right hon. Friend really would not be able to accept it.
The hon. Member for Hillsborough explained, with some graphic examples, that this rate of tax covered a very wide range of products. The hon. Lady the Member for Stoke-on-Trent, North (Mrs. Slater) also mentioned several of the items which are included in the relevant Schedule. She went on to concentrate on pottery. Shortly before the Budget I received a deputation of pottery manufacturers, and I am bound to say they also, like those who have spoken in this debate, spoke with moderation.
The Lady went on to give sound reasons why in this country we should have good pottery. I shall not follow her in derail, and would say only that I agree entirely with her in what she said

on the question of hygiene. On the aesthetic side, one of the happiest memories I have, one I shall always have, is of a visit last year, or the year before, in my previous position with the Prime Minister, to one of the most renowned manufacturers of china in the country. I also agree entirely with what the hon. Gentleman the Member for Stoke-on-Trent, South said about the potters' craft, in which one certainly finds remarkable skills.
It might be helpful if I were to say something in more detail about pottery. The first thing which it is fair to point out is that in the last few years there have been considerable reductions in the rate of tax. In 1955, the rate was 30 per cent. It was reduced in 1957 to 15 per cent., and in April last year it was reduced to 12½ per cent.
The hon. Lady the Member for Stoke-on-Trent, North complained of what she called the extent of this iniquitous tax, a point taken up by the hon. Member for Hillsborough, but the tax amounts to only one-twelfth of the retail price of the products. In considering this matter, one has to keep in in its proper perspective. A tea set costing about £3 bears a tax of about 5s., and if the Clause were so accepted that would be reduced to about 3s.
I know that the pottery industry experienced something of a recession in 1955–56, but it has recovered since then; home market sales have done well, and have been showing a moderate but steady increase each year. In terms of value, home sales for last year were the highest in any recent year.
The hon. Member for Stoke-on-Trent, Central (Dr. Stross) referred, in passing, to the question of holding back purchases of pottery before a Budget. I discussed that subject at considerable length with the deputation which came to see me. I realise full well that this was a serious matter at the beginning of 1959, when there was considerable speculation about Purchase Tax changes, but I think that events have shown that this year matters went very much more satisfactorily. I do not think that there was any serious postponement of retail buying prior to the Budget.

Mr. Ellis Smith: Did the deputation make the point that at the annual exhibition at Blackpool salesmen were holding


orders because of the uncertainty of Purchase Tax? If it did, has that been considered?

Mr. Barber: Yes, the deputation referred to the Blackpool Fancy Goods Fair which, I understand, is of great importance to the pottery industry, but when I looked into this matter, so far as I could see from the trade Press, there was very little, if any, holding back on this occasion, and this time the Fair, which was held in February, was particularly successful.
Total production in the pottery industry, for both the home market and for export, has been going up each year. Between 1957 and 1958, it went up considerably—by about 10·5 per cent. In 1958–59, the increase was very small, only marginal, but the Committee will be pleased to know that in January and February of this year the increase was 4·7 per cent, over the same period last year.
The hon. Member for Hillsborough mentioned cutlery. The rate of tax, 12½ per cent., is the lowest it has ever been and I think that the hon. Member will agree that the industry as a whole would not claim that home demand has been significantly affected by this tax.
Wallpaper was mentioned by the hon. Lady the Member for Stoke-on-Trent, North and she spoke of the cost to the housewife. Here, again, it is fair to point out how this rate of tax works out in practice. The Purchase Tax on wallpaper works out at only about one-seventeenth of the retail price. That means an average addition of about 3s. on the cost of papering an ordinary sized room. Once again I must make it clear that the overriding consideration in asking the Committee to reject this Clause is, of course, the cost.

Mr. Harold Davies: What is the size of the room? Is is a room in a council

house, or a room in a jerry-built house which is being sold for about £2,500 by rotten builders today? How big is the room?

Mr. Barber: It is a room in a nice little house.
The cost of accepting the Clause would be £23 million, which is more than the total of all the concessions which my right hon. Friend was able to make in this year's Budget.
I explained in connection with the new Clause in the name of my hon. Friend the Member for Kidderminster (Mr. Nabarro) why this year we have not felt able to recommend any net reduction in taxation. I will not weary the Committee by going again over all the ground which I mentioned then, because as far as the economy is concerned exactly the same considerations apply.
I repeat that I fully realise from the names which appear on the Notice Paper as sponsoring this new Clause that we are concerned almost entirely with a particular product—pottery. That being so, and in view of the amount involved, I must ask the Committee to reject it

Dr. Stross: In view of the hon. Gentleman's last sentence—and he has expressed this fact throughout his speech—does he mean that had it been possible to stage a debate on pottery alone in which we asked for a concession of between £1½ million and £2 million we might have fared better?

Mr. Barber: No, I could not accept that, because there are so many other types of articles which compete with pottery that I think it would be an unfair discrimination. It would certainly cause a great many anomalies if we were to make such a discrimination.

Question put, That the Clause be read a Second time:—

The Committee divided: Ayes 129, Noes 198.

Division No. 117.]

AYES
[10.42 p.m.


Ainsley, William
Braddock, Mrs. E. M.
Davies, Ifor (Gower)


Allaun, Frank (Salford, E.)
Butler, Mrs. Joyce (Wood Green)
Deer, George


Awbery, Stan
Callaghan, James
Dempsey, James


Bacon, Miss Alice
Castle, Mrs. Barbara
Diamond, John


Baxter, William (Stirlingshire, W.)
Cliffe, Michael
Dodds, Norman


Beaney, Alan
Craddock, George (Bradford, S.)
Driberg, Tom


Bellenger, Rt. Hon. F. J.
Cronin, John
Dugdale, Rt. Hon. John


Benn, Hn. A. Wedgwood (Brist'I, S.E.)
Crossman, R. H. S.
Ede, Rt. Hon. Chuter


Benson, Sir George
Cullen, Mrs. Alice
Edwards, Rt. Hon. Ness (Caerphilly)


Blyton, William
Darling, George
Edwards, Robert (Bilston)


Bowden, Herbert W. (Leics, S.W.)
Davies, Harold (Leek)
Fernyhough, E.




Fitch, Alan
McInnes, James
Slater, Joseph (Sedgefield)


Foot, Dingle
McKay, John (Wallsend)
Small, William


Forman, J. C
Mackle, John
Smith, Ellis (Stoke, S.)


Fraser, Thomas (Hamilton)
Mahon, Simon
Steele, Thomas


Ginsburg, David
Mallalieu, E. L. (Brigg)
Stones, William


Gourlay, Harry
Manuel, A. C.
Strachey, Rt. Hon. John


Greenwood, Anthony
Mapp, Charles
Stross, Dr. Barnett (Stoke-on-Trent, C)


Grey, Charles
Marquand, Rt. Hon. H. A.
Summerskill, Dr. Rt. Hon. Edith


Grimond, J.
Mendelson, J. J.
Sylvester, George


Gunter, Ray
Millan, Bruce
Symonds, J. B.


Hamilton, William (West Fife)
Mitchison, G. R,
Taylor, Bernard (Mansfield)


Hannan, William
Monslow, Walter
Taylor, John (West Lothian)


Hart, Mrs. Judith
Morris, John
Thompson, Dr. Alan (Dunfermline)


Hayman, F. H.
Noel-Baker, Francis (Swindon)
Thorpe, Jeremy


Herbison, Miss Margaret
Oram, A. E.
Timmons, John


Hilton, A. V.
Owen, Will
Ungoed-Thomas, Sir Lynn


Holman, Percy
Parker, John (Dagenham)
Wade, Donald


Houghton, Douglas
Pavitt, Laurence
Warbey, William


Hoy, James H.
Pentland, Norman
Watkins, Tudor


Hughes, Hector (Aberdeen, N.)
Popplewell, Ernest
Weitzman, David


Hunter, A. E.
Prentice, R. E.
Wheeldon, W. E.


Janner, Barnett
Price, J. T. (Westhoughton)
White, Mrs. Eirene


Jay, Rt. Hon. Douglas
Probert, Arthur
Whitlock, William


Jenkins, Roy (Stechford)
Randall, Harry
Willey, Frederick


Jones, Dan (Burnley)
Rankin, John
Willis, E. G. (Edinburgh, E.)


Jones, Jack (Rotherham)
Redhead, E. C.
Wilson, Rt. Hon. Harold (Huyton)


Kelley, Richard
Reynolds, G. W.
Winterbottom, R. E.


King, Dr. Horace
Roberts, Albert (Normanton)
Woodburn, Rt. Hon. A.


Logan, David
Rogers, G. H. R. (Kensington, N.)
Woof, Robert


Loughlin, Charles
Ross, William
Yates, Victor (Ladywood)


Mabon, Dr. J. Dickson
Silverman, Julius (Aston)



McCann, John
Skeffington, Arthur
TELLERS FOR THE AYES:


MacColl, James
Slater, Mrs. Harriet (Stoke, N.)
Mr. Lawson and Mr. Sydney Irving.




NOES


Agnew, Sir Peter
Dance, James
Hughes-Young, Michael


Aitken, W. T.
d'Avigdor-Goldsmid, Sir Henry
Irvine, Bryant Godman (Rye)


Allason, James
Deedes, W. F.
Jackson, John


Amory, Rt. Hn. D. Heathcoat (Tiv'tn)
de Ferranti, Basil
James, David


Ashton, Sir Hubert
Doughty, Charles
Johnson, Eric (Blackley)


Atkins, Humphrey
Drayson, G. B.
Jones, Rt. Hn. Aubrey (Hall Green)


Barber, Anthony
du Cann, Edward
Kerans, Cdr. J. S.


Barter, John
Duncan, Sir James
Kerby, Capt. Henry


Batsford, Brian
Elliott, R. W.
Kirk, Peter


Baxter, Sir Beverley (Southgate)
Emmet, Hon. Mrs. Evelyn
Leather, E. H. C.


Bennett, F. M. (Torquay)
Errington, Sir Eric
Leavey, J. A.


Berkeley, Humphry
Farey-Jones, F. W.
Legge-Bourke, Maj. Sir Harry


Bidgood, John C
Farr, John
Lewis, Kenneth (Rutland)


Biggs-Davison, John
Finlay, Graeme
Lindsay, Martin


Bingham, R. M.
Fisher, Nigel
Litchfied, Capt. John


Bishop, F. P.
Fletcher-Cooke, Charles
Longbottom, Charles


Black, Sir Cyril
Fraser, Ian (Plymouth, Sutton)
Longden, Gilbert


Bossom, Clive
Freeth, Denzil
Loveys, Walter H.


Bourne-Arton, A.
Gammans, Lady
Low, Rt. Hon. Sir Toby


Box, Donald
Gardner, Edward
Lucas-Tooth, Sir Hugh


Boyd-Carpenter, Rt. Hon. John
George, J. C. (Pollok)
MacArthur, Ian


Boyle, Sir Edward
Glover, Sir Douglas
McLaren, Martin


Brewis, John
Glyn, Dr. Alan (Clapham)
McLaughlin, Mrs. Patricia


Bryan, Paul
Clyn, Sir Richard (Dorset, N.)
MacLeod, John (Ross &amp; Cromarty)


Burden, F. A.
Goodhew, Victor
McMaster, Stanley R.


Butcher, Sir Herbert
Gower, Raymond
Macpherson, Niall (Dumfries)


Carr, Compton (Barons Court)
Grant, Rt. Hon. William (Woodside)
Maddan, Martin


Carr, Robert (Mitcham)
Grant-Ferris, Wg Cdr. R. (Nantwich)
Maginnis, John E.


Cary, Sir Robert
Green, Alan
Markham, Major Sir Frank


Chataway, Christopher
Gresham Cooke, R.
Marlowe, Anthony


Chichester-Clark, R.
Grosvenor, Lt.-Col. R. G.
Marten, Neil


Clark, Henry (Antrim, N.)
Hamilton, Michael (Wellingborough)
Matthews, Gordon (Meridan)


Clark, William (Nottingham, S.)
Harris, Frederic (Croydon, N.W.)
Maudling, Rt. Hon. Reginald


Collard, Richard
Harrison, Brian (Maldon)
Mawby, Ray


Cooke, Robert
Harrison, Col. J. H. (Eye)
Maydon, Lt.-Cmdr. S. L. C.


Cooper, A. E.
Harvey, John (Walthamstow, E.)
Montgomery, Fergus


Cooper-Key, Sir Neill
Hendry, Forbes
Morgan, William


Cordeaux, Lt.-Col. J. K.
Hiley, Joseph
Neave, Airey


Cordle, John
Hill, Mrs. Eveline (Wythenshawe)
Noble, Michael


Corfield, F. V.
Hill, J. E. B. (S. Norfolk)
Osborn, John (Hallam)


Costain, A. P.
Hirst, Geoffrey
Osborne, Cyril (Louth)


Coulson, J. M.
Holland, Philip
Page, A. J. (Harrow, West)


Craddock, Sir Beresford
Hollingworth, John
Page, Graham


Critchley, Julian
Hopkins, Alan
Pannell, Norman (Kirkdale)


Crosthwaite-Eyre, Col. O. E.
Hornsby-Smith, Rt. Hon. Patricia
Pearson, Frank (Clitheroe)


Crowder, F. P.
Howard, Gerald (Cambridgeshire)
Peel, John


Curran, Charles
Howard, John (Southampton, Test)
Percival, Ian


Currie, G. B. H.
Hughes Hallett, Vice-Admiral John
Pickthorn, Sir Kenneth




Pilkington, Capt. Richard
Shepherd, William
Turton, Rt. Hon. R. H.


Pott, Percival
Skeet, T. H. H.
van Straubenzee, W. R.


Powell, J. Enoch
Spearman, Sir Alexander
Vickers, Miss Joan


Price, David (Eastleigh)
Stevens, Geoffrey
Wakefield, Edward (Derbyshire, W.)


Prior, J. M. L.
Steward, Harold (Stockport, S.)
Ward, Dame Irene (Tynemouth)


Prior-Palmer, Brig. Sir Otho
Stodart, J. A.
Watts, James


Ramsden, James
Stoddart-Scott, Col. Sir Malcolm
Wells, John (Maidstone)


Rawlinson, Peter
Studholme, Sir Henry
Whitelaw, William


Redmayne, Rt Hon. Martin
Summers, Sir Spencer (Aylesbury)
Williams, Paul (Sunderland, S.)


Rees, Hugh
Sumner, Donald (Orpington)
Wilson, Geoffrey (Truro)


Renton, David
Talbot, John E.
Wise, A. R.


Ridley, Hon. Nicholas
Tapsell, Peter
Wolrige-Gordon, Patrick


Ridsdale, Julian
Teeling, William
Woodhouse, C. M.


Roberts, Sir peter (Heeley)
Thomas, Leslie (Canterbury)
Woodnutt, Mark


Roots, William
Thomas, Peter (Conway)
Woollam, John


Ropner, Col. Sir Leonard
Thompson, Richard (Croydon, S.)
Worsley, Marcus


Scott-Hopkins, James
Thornton-Kemsley, Sir Colin



Sharples, Richard
Tilney, John (Wavertree)
TELLERS FOR THE NOES:


Shaw, M.
Turner, Colin
Mr. Brooman-White and




Mr. Gibson-Watt.

New Clause.—(CLERGY, VOLUNTARY OFFERINGS.)

The earnings of clergymen and ministers of religion, of all denominations, so far as derived from the voluntary offerings of their congregations during the immediately preceding year, shall not be regarded as income for the purposes of any of the Income Tax Acts for any future year of assessment.—[Mr. Hendry.]

Brought up, and read the First time.

Mr. Forbes Hendry: I beg to move, That the Clause be read a Second time.
The hon. Members who support this Clause represent every shade of religious opinion in the Committee. It may appear presumptuous that I, a new Member, taking part in my first Finance Bill debates, should move the Second Reading of this Clause. It is a rewritten version of a Clause which has been moved very often during the past forty years. I was horrified to hear it described as an hardy annual. As a simple churchman it has always been one of my cherished desires that the Easter offerings and other voluntary gifts from the people to their priest, minister, rabbi, or whoever he may be, should be freed from the incubus of Income Tax. It is a horrible and disgusting thought that the Chancellor should put his hand on the altar and take away the gifts of the people to their priest.
Hon. Members should remind themselves that there is a considerable amount of opinion on this matter in the country and I make no apology for bringing up this question once again. Nor do I make any apology for having rewritten the Clause. I do not presume to have any superior wisdom or powers of draftsmanship. I have rewritten it to help the Chancellor to accept a Clause which has received the support of the leaders of both parties over a long period. According to the record, this Clause, as originally drafted, was supported by the present Prime Minister and by representatives of religious opinion other than Anglican. Originally the Clause was designed for the Anglicans but it has been supported by Jews, Roman Catholics, Nonconformists,

members of the Church of England and every type of religious opinion that I could mention.
I tried to discover why the Clause has not been accepted in the past. It seemed to me that a similar new Clause on the Notice Paper—Easter Offerings—in the name of my hon. and gallant Friend the Member for Cheltenham (Major Hicks Beach) and other hon. Members had the one insuperable objection that it was discriminatory, and that seems to have been the reason why this Clause in its previous form was not accepted. It discriminated in favour of one body of Christians. I have tried to rewrite the Clause so that it will apply to every type of religious thought.
Of course, the proposal is discriminatory in that it relates to one type of person, a unique body of men who have a vocation and who are unmistakable. If we grant this concession to that body of men, as far as I can see there is no fear that any other body of men will claim the same privilege. In past debates parsons have been likened to jockeys and to waiters. There has even been a debate on the difference in tax treatment between the benefits of professional footballers and of professional cricketers.
If we are to discriminate, let us discriminate properly. If we think about it, we can see that there is no possible comparison between a parson and these other people. The parson does not go into his vocation to make money. He is called there. No one in his proper mind would think of the Church as a way of making money. We all know that in our religious feeling we are quite different from any other feeling. Whether we call the parson a rabbi, a priest, a minister or a pastor, we have great respect for him. We regard Church affairs quite differently from ordinary, mundane affairs. We cannot mistake our parson for anyone else, and if we grant this concession to parsons we shall be doing something which they deserve and which is unlikely to be taken advantage of by any other section of the community. Of course we are discriminating—but it is in favour of people who require our discrimination.
I have also discriminated in the type of earning which I ask the Chancellor to exempt from Income Tax. If a parson


is in a church which is heavily endowed, it seems to me that the endowment should not count for exemption. I am trying to obtain an advantage for the voluntary offerings to churches by the people of their congregation, which is entirely different from an endowment. I am in no way seeking to exempt the parson's private income. If he is a wealthy man with a private income, he can pay his tax in the same way as anybody else does. I am asking the Committee to accept the Clause in respect of the voluntary offerings of the congregation. If the parson has a salary—for example, an Army chaplain—then, of course, his payment for that job should not be taken into account when we are deciding which sums to exempt from tax.
The Army chaplain is a professional man who is paid by the Government in conformity with his professional status—and very properly so. But the ordinary parish priest or Roman Catholic priest or Jewish rabbi or Baptist or Methodist minister spends years of his life in a most expensive education, an arduous education, imposes upon himself a discipline and an austerity which nobody else would accept and at the end of it receives what can be compared with a labourer's wage. It may be argued, if he is a wealthy man, that he does not need this concession, but I have yet to meet the parson who cannot find an extremely good use for this money. It is given to him in gratitude for what he has done and will do, and if he himself does not require it, then, if he is doing his job properly, he will use the money where it will do the most good. I am sure that the majority of parsons would do that.
I turn to the question of denomination. There has been an objection to this proposal in the past, but this new Clause has received the support of practically every religious denomination. I have received every encouragement from almost every hon. Member to whom I have spoken on this subject—a great many of them—and discouragement from very few. Every religious denomination should be included in these provisions. We must remember that in the old days there was an Established Church which covered the great bulk of the inhabitants of this country—England

or Scotland—but that is no longer the case. The Clause should therefore apply to all denominations.
11.0 p.m.
Over thirty members of the House of Commons support the Clause. They have signed their names to it. Many of them are not here, because they have forgotten it. Many of them in their day-to-day life forget about the Church, but when disaster comes the Church is there. It will be waiting for us, and it is up to us as members of the House of Commons to support our Church, whatever it may be.
Since most ancient history there has been a subvention from the State to the Church. We read about it in the Old Testament. It has been going on continuously. From time to time it has been abused, but the principle has always been there. I suggest to my right hon. Friend the Chancellor of the Exchequer that in changed conditions the most equitable way of supporting the different denominations into which we are unfortunately split at the moment is a subvention of this sort by way of relief of Income Tax for the person.
Every day the House of Commons meets for Prayers. Sometimes they are very sparsely attended, but we are there. On great days they are very well attended. In case there are any hon. Members present who have not attended Prayers for some time, I remind them that one clause in the prayer for Parliament is that the result of our councils should be to the glory of God and the maintenance of true religion.
Tonight the Committee has the opportunity of putting into practical effect the prayer which is said in the House every day. The amount involved is negligible. I do not ask my right hon. Friend to make any great inroads into the amount he raises in taxation. It will make no difference which we can count to any individual, but it will make a very great difference to the clergy, who look after our spiritual interests.
I ask the Chancellor of the Exchequer to be bold. The wording of my Clause may not be acceptable. It may be too wide. My right hon. Friend has legal advice which is not available to me. If my right hon. Friend gives an undertaking to look at this, I am prepared to


withdraw the Clause, with the permission of my backers I should like my right hon. Friend to promise me that he will consider it between now and Report, and not do what was done in 1957 when this was last debated. It was allowed to be forgotten altogether. There was a change of Chancellor, and between 1957 and 1960 nothing has been done.
I ask my right hon. Friend to consider this Clause, and his advisers can tell him if it is too wide. If it is too wide, it is not beyond their capabilities to put it right. If my right hon. Friend does that, I ask him to give an undertaking to bring it back on Report, to be bold, and to do something to bring into practical effect the prayer which is said in the. House of Commons every day.

Dr. Horace King: The hon. Member for Aberdeenshire, West (Mr. Hendry) has moved the Clause in a very able manner. He was right to make no apology for bringing up this subject yet again. If any apology is due to the Committee, it is from a long line of Chancellors of the Exchequer who, in spite of demands from all quarters of the Chamber, have resisted this appeal, which has been made year after year, as though they were Shylocks and as though their guiding principle was, "I hate everybody who is a Christian".
I remind the Committee that Easter offerings, which are the subject of the new Clause in the name of the hon. and gallant Member for Cheltenham (Major Hicks Beach), were exempt from taxation for a very long time until a series of rulings were made in the courts that they should be subject to taxation. Since then the House of Commons has been trying to get them back to the state in which they were before the legal rulings were given.
It is worth pointing out that the clergy of very denomination are underpaid. Never since the time of Chaucer's Poor Parson have they been doing such excellent work for so little money. There never was an age of such crude materialism as at the present time. I pay tribute to the work of the clergy, who in Christianity, like the teacher in education, are fighting against the growing spread of materialism. It is my privilege to meet many young clergy, and, despite

the poor pay, we are recruiting at present a fine body of young virile professional Christians.
Year after year we have advocated the simple principle that the money of which we are talking—the free gift from the congregation to its clergymen—has already had tax paid on it by the givers; that we do not tax Christmas boxes; that if a present is made to a man on retirement, the Revenue does not take a piece out of it; that we do not tax birthday presents, and that people who give freely, out of affection, out of love, out of faith, do not want part of their gift to go to the Government. Like all other human beings, the Christians in the community have no love or affection for the Treasury, and resent very much, if they make a gift purely out of good will to someone who is serving them well, that the Treasury should insist on taking some part of it.
There are ways of evading this. Givers could make their gifts in all kinds of surreptitious forms, but the very nature of the clergyman himself and of the Christians who make the gifts make it extremely unlikely that they would seek methods of evading the levy which the Chancellor insists on making on what the old Christians would have called "love gifts".
This subject has been debated year after year, and the hon. Gentleman was right in calling attention to the debate of 1957, which ended in an orgy of good will as the then Chancellor, the right hon. Gentleman the Member for Monmouth (Mr. Thorneycroft), promised to look into the matter. He then promised to see
…whether…it is possible to give effect to the desire to assist and encourage ministers of religion and the churches generally."—[OFFICIAL REPORT, 1st July, 1957; Vol. 572, c. 844.]
What has been done since then? As far as I am aware, nothing has been done to meet the unanimous wish expressed from both sides in that debate, as in previous debates. On earlier occasions we spoke of the Easter offerings, and I am very happy that as a result of the 1957 debate we have widened the term, because not every denomination makes gifts of this kind at Eastertide. The mover of the new Clause was therefore right to point out that it seeks to benefit all ministers of all religions, and that the


general principle behind it is that voluntary gifts ought to go in their entirety to those to whom they are made. I hope that the Committee will not let the Financial Secretary go away tonight until he has conceded what we have demanded for so long.

Sir Colin Thornton-Kemsley: One evidence, if, indeed, evidence is needed, that this new Clause commands universal support in the House is the very large attendance in the Committee at this late hour. I support the new Clause very warmly because, as drafted by my hon. Friend the Member for Aberdeenshire, West (Mr. Hendry)—whose sincerity I am sure we all admire and respect—it extends to all denominations, and has no limits as regards when the gifts are given.
In the church that I attend when I am in the South at weekends, the custom is to give a Whitsun-day offertory to the assistant clergy, and the hon. Member for Southampton, lichen (Dr. King) has already spoken of the Easter offering. This new Clause has no such limitation. It is for all denominations and for gifts and free-will offerings given at all times of the year.
One of the troubles about the present arrangement is that it gives rise to abuses. Most of us know of cases where people have slipped a "fiver" in an envelope and have passed it to the parson at some other time of the year, or have put it through his letter box. It is not right that a law of this kind should give rise to means of evasion, and it is not very nice for the recipients of these gifts to get them in that way, since by nature of their calling they are particularly scrupulous about these things. I can well imagine that gifts received in that way may cause them to wonder what action they ought to take.
As has been said by other speakers, we are dealing with a class of person who are on a very low standard of income. That applies to nearly all the denominations. Not one of us in this Committee can be proud of the way that we pay our ministers of religion. They receive a very low income. When members of a congregation—often, as one knows, at personal sacrifice—give generously to the

free-will offerings for the incumbent of a parish, our plea is that no part of that gift ought to be taken by the Treasury.

Mr. Loughlin: I wish to make an appeal to the Financial Secretary, because I feel that an injustice is being done to a body of men who are not following a calling solely on the basis of securing money. If the clergy were in this profession, whatever the religious denomination, solely on the basis of what they receive in salary, there would be very few clergy indeed in the country.
It is not strictly true to liken these voluntary offerings to the gratuities that are paid in certain crafts and trades. There can be no likening of the voluntary offering that I make to my clergyman to the type of tip that I may give to a waiter when I am at an hotel. These offerings are made not because a service has been rendered to us but because of the recognition that the remuneration that the clergyman gets is so limited. Indeed, we ought to be ashamed of the way that we treat the clergy.
Whilst I do not want to depart from the sweet reasonableness that has been shown in the debate on this Clause, I do not think there would be any political significance in any vote on this issue. I think there comes a time—and this issue has been debated so often—when one can no longer merely plead in cases of injustice of this kind; and there would be no political significance if those of us who are in favour of the Clause went into the Division Lobby together, in the event of there being no concession from the Government Front Bench.

11.15 p.m.

Major W. Hicks Beach: I understand that the new Clause—Easter Offerings—standing in my name, which deals with a similar subject, can be debated with this new Clause which was submitted in such moving terms by my hon. Friend, the Member for Aberdeenshire, West (Mr. Hendry).
This is a completely non-party matter which has been debated for a great number of years when we have been foisted off by various arguments by various Chancellors of the Exchequer of all parties. We have been told that if this concession were given it would open the doors to abuses. They say that this


Clause is an old chestnut, but that argument is a very old chestnut from the Treasury, too.
I am sorry we have not got the Chancellor of the Exchequer here because that might have meant we were to get a concession. If it is beyond the wit of the Treasury—

Mr. Harold Wilson: The hon. and gallant Gentleman has just made the point that the Chancellor is not here. I do not want to move, "That the Chairman do report Progress and ask leave to sit again," in order to get him here, but it would be a good thing for someone to go out and bring him in. We are debating an issue on which pretty clear undertakings were given three years ago, which have not been carried out. It seems a little unfair that the Financial Secretary should have to carry the burden of a fairly united Committee on this matter. The Chancellor should be here to hear the hon. and gallant Gentleman who is speaking and other hon. Members.

Major Hicks Beach: If I could be allowed to continue my argument—

Mr. Wilson: The Chancellor should hear it.

Major Hicks Beach: He can read it in HANSARD tomorrow. As I was saying, this is an old chestnut and a very good chestnut. A very genuine case has been put forward by all parties for a long time. In 1957 we had an interesting debate on the subject and certain undertakings were given, it is true. I hope very much that we shall have a satisfactory reply from the Financial Secretary.
It is really quite absurd for the Treasury to say that it is beyond the wit of their draftsmen to produce a Clause that could satisfy any inspector of taxes and the Inland Revenue. If it is beyond the wit of the Treasury draftsmen I will offer my services. The whole proceedings on the Finance Bill have convinced me of one thing—that the time has came when we have got to employ private enterprise to draft these Finance Bills.
We really must get down to this small concession to a very hard-pressed class of people. I hope that we shall not get a non-committal reply. If we do get a non-committal reply which does not promise us something in the next

Finance Bill I say straight away that I shall certainly divide the Committee on this subject.

Mr. Barnett Janner: I was very interested indeed in the remarks of the hon. and gallant Gentleman the Member for Cheltenham (Major Hicks Beach) until he came to his penultimate sentence in which he said that he hoped something would be done, not today but in terms of tomorrow. I hope he did not mean that. I hope that the Chancellor, if his heart was hardened before, will now, having been told what was said prior to his entry, soften a little and tell us what he can do about this new Clause.
This is the kind of Clause that commends itself not only to the denominations in the Christian Church but to other religious bodies in the country, including that to which I have the honour to belong.
I had the privilege of working in my early university days in Cardiff with many students who were men of the greatest sincerity who could easily have obtained high distinction in other professions. I am speaking not particularly about Jewish people but in the main about Nonconformists. Many of them came from the pits. They could have reached high positions in other professions but they were content to use the gifts with which they had been endowed to help their fellow men and women to a better spiritual understanding of life. They went out at weekends for a few meagre shillings to bring the message home in the chapels and churches of South Wales. I have the greatest admiration for men of that description, as I have of similar men in my own religious body.
I am sure that the Chancellor will appreciate that these men could have obtained far higher stipends than they receive in the churches and synagogues. and I cannot understand why this should not be taken into consideration. These are voluntary gifts made by members of congregations who realise the manner in which these men devote their lives to the service of their fellow men. These gifts are very different from gifts which are sometimes made in other circumstances. They are not gifts made to people who could well afford to keep their status and position without them.
If something in the nature of a seven-year covenant were made by the donor, there would be a remission of tax and the donor could give twice the amount that otherwise he would have donated. It is not very dignified for a man to have to make a deed of covenant by way of a charitable gift to a clergyman, nevertheless he could do so if he wished, though it might not be acceptable to the clergyman concerned. If a simple device of that kind were used, the gift could be made without the Treasury having the benefit in the long run.

Mr. H. Wilson: Lest anyone should feel that this is a way round which would make it unnecessary for the Chancellor to accept the Clause, I hope that my hon. Friend will recognise that receipts from such transactions are themselves taxable in the hands of the recipient.

Mr. Janner: I appreciate that. I am not suggesting for a moment that that device should be used. But that is not quite the answer, because the gift now given is given without tax relief of any kind. The individual could give twice as much, therefore, if he made a deed of covenant.

The Temporary Chairman (Mr. F. Blackburn): I hope that the hon. Member will leave that, because he is suggesting an alternative method.

Mr. Janner: I agree that it is not in order to discuss that, but I did not want the subject to pass without some indication to the Chancellor that the matter could be dealt with, if a person wanted to deal with it, in that different way.
I appeal to the Chancellor. This is a cause which ought not to be debated in this Committee. I do not think it is fair to the people themselves, about whom we are speaking, that there should be a long debate upon it. I certainly do not think that anyone in this Committee—I hope I am right—would venture to believe that this is not a proper and reasonable request. In these circumstances, I ask the Chancellor, if he has not already made up his mind, to give an indication that he will consider the proposal between now and Report, rather than leave it to another year.

Sir Charles Mott-Radcliffe: I very much hope that my right hon. Friend the Chancellor will not consider this new Clause to be an unimportant one. Even though there may not be a long discussion on it, I hope that he will in no way underestimate the strength of feeling on both sides of the Committee, irrespective of party and irrespective of denomination.
My hon. Friend the Member for Aberdeenshire, West (Mr. Hendry), who moved the Clause, rightly refused to apologise for the fact that it is a hardy annual, because it is a very good hardy annual. I can remember making a speech here fourteen years ago on exactly the same subject—at 7 o'clock in the morning. Successive Chancellors, from both sides of the Committee, have given lip service in general to the principle of this new Clause, but, when it comes to the point, they have done nothing whatever about it.
Although no specific promise was made in 1957 when this matter was last discussed, there was something like a pretty good undertaking given by the then Chancellor that he would have a look at the position of the clergy in general between then and the next Budget to see in what way he could best help clergymen. It is an undeniable fact that in the Budget of 1958 and in the Budget of 1959 nothing whatever was done about it.
I beg my right hon. Friend not to take this discussion too lightly. There are a number of arguments which could be put. I do not myself say that the right argument is that the clergy are—without any question, I should have thought—probably the most underpaid of almost any section of the community. That is a fact. I do not think anybody can deny it. I am not sure, however, that that is the right argument in the context of the new Clause. I do not think the right argument is that, as a matter of historical fact, for the first sixty years of the life of Income Tax, between 1844 and 1907, Easter offerings in the Church of England were not considered liable to tax at all. I do not myself know why from 1908 onwards what up to then had been a voluntary gift of appreciation to the incumbent, without any question of tax, should subsequently have been regarded as liable to tax.
I think the real argument is that the sum, the pounds, shillings and pence, which accrues to the Treasury from these voluntary gifts, made at various times, is infinitesimal compared to what the incumbent would gain if the gifts were free of tax. The real argument is also, if I may say so, in moral and psychological terms as well.
11.30 p.m.
The other argument is that the whole system of taxing the gift to an incumbent, be it on Easter Sunday or any other time of the year, creates anomalies, and everybody knows it. I have been a rector's warden for a very long time and I am the patron of a number of livings. I know quite well how much the Easter offerings amount to. I assure my right hon. Friend that they vary enormously from year to year. They vary as much as 50 per cent., at any rate, in the country districts from which I come. It would be impossible for anybody in advance to guess what the value of the Easter offering would be for the purposes of calculating the income of the incumbent. It depends on whether Easter is early or late, on how many trippers and other people go to church and so on. It is not an assessable factor in the income of the incumbent.
I am sure that my right hon. Friend is aware of the anomalies. If the parishioners give a turkey to the parson at Christmas as an appreciation of his services, the value of the turkey is not accounted for tax. If they give him a cheque at Christmas with which to buy the turkey, the value of the cheque is not accounted for tax. If they give him a cheque some time in the spring so that he can go for a summer holiday, the value of the cheque is not returnable for tax purposes. But once anybody goes to church on Easter Sunday and puts money into the plate where that sum by custom—and only by custom—goes to the incumbent, then that sum of money is returnable for tax.
In other words, the more generous one is on Easter Sunday, in respect of the Church of England, the greater the liability for tax. The more popular the incumbent is, the less may be the net value of the Easter offering. That is absurd and there is every sort of way of getting round it.
To put the argument on this rather low level, the Easter offering in respect of the Church of England in a sense is like a tip, and we have had all sorts of discussions in the House about tips being returnable for tax. Postmen get tips on Boxing Day and the tips vary according to how good the postman is and how much the household like him. Are those tips returnable for tax as part of the postman's wages?
Round about Christmas time, most hon. Members, feeling full of good cheer and the Christmas spirit, give a Christmas-box to the staff who so ably look after us during the rest of the year. I do not know, but I imagine that the sum varies enormously. Is what is put into the Christmas box for the staff accountable for tax?

Mr. H. Wilson: The hon. Gentleman should not make the Treasury more generous than it is. When known to the Treasury, Christmas boxes are invariably taxed.

Sir C. Mott-Radclyffe: I should not like to argue the point, but I should be surprised if Christmas boxes were taxed.

Mr. Wilson: When known to the Treasury.

Sir C. Mott-Radclyffe: I do not want to get out of order or into a prolonged discussion, but I should be very surprised if the right hon. Gentleman could sustain that argument.

Mr. Wilson: I am sure that it is the case. I think that there is a concession in the case of savings certificates. I am not talking about gifts to relatives and so on, but if they are Christmas boxes related to services rendered, then, if they are known to the Treasury, they are taxed.

Sir C. Mott-Radclyffe: Perhaps that was not a good example. However, that is a technical point and I do not want to argue about what is a Christmas box and whether it should be in kind or in cash and so on. That is a side issue.
All of us, on whatever side we sit and to whatever denomination we belong, feel that there is something slightly sordid and distasteful about taxing a free-will offering, voluntarily given by parishioners to their parson on Easter Sunday, or any


other day, as a kind of concrete expression of thanks to a man of high calling who performs the marriage service when we are married, who baptises our children when they are born and who buries loved ones when they die. I really do not think that when money is put into the plate on Easter Sunday for someone who performs those spiritual functions the Treasury need adopt too cynical or too rigid a point of view about the matter.
I hope that at long last my right hon. Friend the Chancellor will realise the strength of the feeling that exists about this issue and will not try to interpret too cynically in terms of pounds, shillings and pence the value of the moral and psychological arguments of our case.

Mr. A. C. Manuel: Perhaps it is not inappropriate that even at this late hour another Scottish Member should say something in support of the very excellent case put by the hon. Member for Aberdeenshire, West (Mr. Hendry) and also of the sincerity which I am quite certain that he feels about this matter. I am very hopeful that the Chancellor is really going to do something in the matter tonight. I hope that the right hon. Gentleman will not be completely hidebound about it. If the Financial Secretary is to reply to the debate, I Hope that he will be directed to give an answer to the Committee which will meet the sincere points of view which have been expressed.
This is not a political matter. It is a matter of deeply held beliefs by hon. Members on both sides of the Committee to which the Government, and the Chancellor in particular, should pay regard. The sum of which the Exchequer would be deprived by the acceptance of the Clause would, I assume, be quite infinitesimal in so far as a lump sum is concerned. Therefore, if the answer is to be "No", I cannot understand why the Government are taking up such a hard attitude in the matter.
If we believe what we are saying tonight—and everyone who has spoken has been in support of the principle which we are trying to establish—I hope that we shall show the Chancellor that we are not being mealy-mouthed about the matter and just talking for talking's sake but are going to vote in the Division

Lobby in order to have the will of the Committee expressed.
I am quite certain that clergymen in Scotland are very badly underpaid indeed. Many members of a congregation are motivated to contribute to these good will or voluntary offerings—call them what one will—in order to augment the income of the church because they regard the clergyman as a man doing very good social work for which he is quite unpaid. He is doing work that would very often become a Government liability if he were not doing it. Very often he is saving Government Departments expense which otherwise they would have to bear.
I notice that the Financial Secretary is smiling at his colleague; I hope he is paying serious regard to what is being said and is not being jocular about the arguments being advanced. If he has something to say, or to joke about, let us hear what it is. Some of us believe quite sincerely in what we are saying. It is not a matter for two Government Front Benchers to joke about.
A large part of the voluntary offering is in pennies and sixpennies, donated from wages which have already been subject to tax at the pay table. Working-class people would be very loath to give something if they realised that part of it was to be taken by the Treasury. It would be a very good thing if the Committee took the step that so many of us are advocating tonight. We would rise in the estimation of our people if we showed our good will towards the principle contained in the Clause.

Sir Douglas Glover: I feel very strongly about this matter. The Government of the day, whether they have been Labour or Conservative, have always behaved in the most extraordinary way. For the last fifteen years we have been fighting an ideological war throughout the world, during which time we have spent £10,000 million. The very people who are trying to keep the Christian ethic alive in the world—and this country is very unChristian at the moment—are the clergymen, and yet when those who believe in the Christian ethic try to show some sort of appreciation of the work done by these very underpaid people the Treasury steps in and takes part of the blessed money—


and the money has been blessed at the altar. If I wish to give my niece or brother-in-law a money present at Christmas, however, it will escape tax, because nobody will know about it.
When the amount involved is weighed in the scale; when we realise how underpaid these people are, whatever their denomination—Jewish, Roman Catholic, Church of England or Nonconformist—and that if they acted together as a class and formed themselves into a trade union they would probably be on strike tomorrow for a salary increase; when we realise how we get our religion "on the cheap" in this country and, at the end, when we remember that out of what we may give clergymen as some token of appreciation of the work they have done the Treasury takes 7s. 9d. in the £ and uses it to help run the State, we must come to the conclusion that we have our values all wrong, especially remembering, as I say, that these people are trying to keep alive the Christian ethic, which is the only thing that makes freedom worth while.
This is not the first debate we have had on this matter since I came into the House. I have never yet voted against the Government, but if the Clause is taken to a Division I shall vote against them.

11.45 p.m.

Mr. Gower: I hope that, having heard the case stated, my right hon. Friend will not reject the principle embodied in the Clause. I am glad that my hon. Friend the Member for Aberdeenshire, West (Mr. Hendry) has extended the wording to include ministers of all denominations. I believe he said that he was prepared to consider an alteration in the wording of the Clause. I deem it probable that that will be necessary because undoubtedly the present Clause has one serious imperfection. There are ministers of some Free Churches whose salaries are derived entirely from the voluntary offerings of their congregations and therefore it is obvious that in its present form the Clause cannot be accepted. But I hope that my right hon. Friend will not take that as an excuse for rejecting the principle which is so obviously acceptable to hon. Members on both sides of the Committee.
We are here referring to an identifiable part of the community, the clergy

and ministers of religion, and it would be easy to frame a form of words to identify the beneficiaries. We have also a definitely understood subject matter, the voluntary offerings. The wording of the Clause could be altered to clarify what we all understand. Hon. Members have referred to people who have had no share in the increasing national prosperity. I know of clergymen, and certainly some Free Church ministers, who are probably the poorest people in their churches and they must be dedicated in an extraordinary degree to carry on under those conditions. The voluntary offerings are an act on the part of their parishioners to ameliorate to a modest degree the conditions under which these people do their work. I sincerely hope that my right hon. Friend will take account of the undertaking which was undoubtedly given in some degree in 1957 and will feel it possible to accept our plea tonight.

Mr. J. Enoch Powell: It is part of the natural convention of these debates, especially on proposed new Clauses to the Finance Bill, that those who wish to urge an alleviation of taxation for some section of Her Majesty's subjects should occupy the debate and that it should be left to the spokesman of the Executive to explain the reasons against the proposed course, even when those reasons may appeal to many hon. Members on the back benches on both sides of the Committee, and even in some cases to a majority of them.
This is a very natural and perhaps I may say a proper convention, but I hope that I may be allowed to break it on this occasion by expressing a contrary view to those which have hitherto been expressed from both sides of the Committee. I hope it is not inconsistent for a loyal son of the Anglican Church to do so.
It seems to me that were we to add to the Bill this Clause, or a Clause having this kind of effect, we should be doing a wrong and an injustice. It seems clear to me that these payments are indisputably and unavoidably of the nature of income, and most of the arguments which have been used in favour of this Clause only strengthen the view that these payments are income. Neither their voluntary origin, nor the low pay of the recipients, nor the nature of the occasion on which the payments are


made, nor any of the circumstances, alters the underlying fact that these payments are part of the income of the recipients, and would be treated as income were they similarly given to other persons.
In those circumstances, I cannot feel that it would be desired by those whom we are trying to help in this way that a discrimination should be made—and I believe it to be a discrimination—in their favour and that they should not be taxed upon what is income in the same way as the rest of Her Majesty's subjects have to be taxed.
I hope, therefore, it will not be thought that there are not very much two sides to this question.

Mr. Ifor Davies: I have respect for the point made by the hon. Member for Wolverhampton, South-West (Mr. Powell), but I must emphasise that we are dealing with people who are concerned with the things of the spirit rather than with material matters. Having regard to the sympathetic speeches from both sides of the Committee, I think that there is a case for an exception to be made. I do not accept the point made by the hon. Member for Barry (Mr. Gower) that there is a technical difficulty about this; there is no difficulty.
I speak as one who has had a very close contact with a denomination, for I speak as the secretary of a Congregational church, a position which I have held for many years. There is a crisis in the Church today because not enough students are entering the Church to maintain its great work. Students and ministers have to eat and live. There is a difficulty in recruitment in practically every denomination, and the acceptance of this Clause would help the position.
While I respect the point made by the hon. Member for Wolverhampton, South-West, having regard to the feelings expressed tonight I suggest that the House of Commons should make an exception for these people.

Mr. Diamond: What I am about to say will prove unpopular. I will preface my remarks by pointing out that I learned my Socialism in a hard school, having been brought up as the son of a rabbi who had to live on very modest means.
This new Clause raises a matter of conscience. The hon. Member for Aberdeenshire, West (Mr. Hendry) moved the new Clause admirably, and I would almost say perfectly. He made the case accurately that this is a matter of differentiation and that we are entitled to differentiate in respect of this unique and special body of people.
This is a matter of conscience for two people—the conscience of the recipient and the conscience of the giver. I agree entirely with the hon. Member for Wolverhampton, South-West (Mr. Powell) that the conscience of the recipient ought to be such that he would not want to be in receipt of charitable and special treatment from the Inland Revenue. As for the conscience of the giver, my conscience will not be mollified because a body of important persons who are doing a unique service to this country, which needs to be done now more than ever, are to be helped in this way and because my responsibility as a giver and a provider of adequate living remuneration for them is to be fobbed off on to the Treasury. If we believe that this should be done, we should do it ourselves.

Mr. Amory: I apologise to my hon. Friend the Member for Aberdeenshire, West (Mr. Hendry) for not being present when he' moved the new Clause. I had some work to do which I found it very difficult to postpone and I am sorry if I missed several other speeches, too. I know how strongly hon. Members feel on this subject. It is a subject which we have discussed on a number of previous occasions, and on every occasion my predecessors have not found it possible to accept the validity of the principle which lies behind this new Clause.
I found the observations of my hon. Friend the Member for Wolverhampton, South-West (Mr. Powell) absolutely conclusive. All of us must feel that we are dealing with men who are devoted to a high vocation. Further, we all agree that in most cases they are underpaid. If all of us feel that, the right answer must be to raise their pay rather than to seek for discriminatory tax treatment. That is the way to solve the problem.
On a number of occasions it has been held that voluntary offerings of all kinds are income. That has been held by


courts of all levels. Coming to ministers of religion, nearly all clergymen obtain some part of their income in the form of voluntary offerings. I understand that many ministers of the free churches receive most of their income, in some cases all their income, in that form. In many cases the voluntary offerings are not made direct to the clergyman in the parish but are made to the central fund, and then payments are made out from that to clergymen whose stipends particularly need supplementing. Therefore, voluntary offerings of this kind are a more complicated matter than appears at first sight.
If all voluntary offerings were exempted, some very strange anomalies would arise in the treatment. A clergyman whose income was £800 a year, largely composed of voluntary offerings, would pay very little tax indeed, whereas a clergyman whose stipend of £800 was paid otherwise than by voluntary offerings might pay a substantial sum in tax.
My predecessor examined this question in 1957 with a real desire to find a solution. In 1958 we found one thing that we could do, and which we did, for the benefit of the clergy, namely the removal of the disqualification from charity relief in certain cases.
It may be thought offensive to compare voluntary offerings received by clergymen with the tips and gratuities received by other people, but exactly the same principle of taxation applies, and such offerings in tips and gratuities are subject to tax.

Sir D. Glover: I admit that tips and gratuities are subject to tax if the Treasury ever finds out about them. Does my right hon. Friend really suggest that the Treasury rakes in even 50 per cent. of the tax due on tips and gratuities given for services rendered? It is very offensive indeed to put offerings at Easter-time on the same level as tips and gratuities. [HON. MEMBERS: "Hear, hear."]

Mr. Amory: That is exactly why I referred to them in the way I did. I am not putting them on the same level. I was merely pointing out, because one or two hon. Members have spoken as if tips and gratuities are not taxable, that tips and gratuities are taxable whenever, and to the extent that, they come to the notice of the taxation authorities. I

hasten to say that I do not in any way place those kind of offerings on the same level as voluntary offerings to the clergy.

Mr. Loughlin: If the right hon. Gentleman is not suggesting that gratuities and tips are to be likened to voluntary offerings, why is he using the argument?

12 midnight.

Mr. Amory: I was merely pointing out, because one or two hon. Members inferred that tips and gratuities were not taxable, that they are, in fact, taxable as far as they come to the notice of the authorities.
Another difficulty is that it has been held by every authority that voluntary offerings are income. If one starts exempting voluntary offerings from that ruling, where does one stop? It must be remember that, as well as the clergy, there are other devoted people who are rendering unselfish service at very low remuneration and, again, whose remuneration is partly in the form, directly or indirectly, of voluntary contributions—

Mr. Janner: Is the right hon. Gentleman suggesting that, for example, if someone were to make a gift direct to him in consequence of the great respect he had for the services the right hon. Gentleman renders to the country, the right hon. Gentleman would have to pay tax on it?

Mr. Amory: If it were paid as voluntary offerings are paid to clergymen by virtue of their office, it would be taxable.

Mr. Manuel: Every Christmas, hon. Members are asked to contribute to voluntary gifts for the staff of the House of Commons. Does the right hon. Gentleman call for a return of that? He knows that the money is given very liberally by many hon. Members. Does he call for a return, and deduct Income Tax?

Mr. Amory: Any contribution of that kind received as a voluntary contribution for the services they perform in the course of their ordinary duty is taxable—

Mr. Manuel: Does the right hon. Gentleman get it from them?

Mr. Amory: —and as far as the information comes to the knowledge of the taxation authorities, tax is, of course, levied.
I must say that, for the reasons I have given, I believe that it would be absolutely impossible for me to accept this new Clause. All I can promise hon. Members—because I am aware of the sincere and strong feelings they hold—is that I shall look into this personally yet again, and see whether there is anything I can do in the direction in which they want me to go which would not do complete violence to the principles of our taxation system, but I simply could not accept this Clause without doing violence to those basic principles.
If I can find something that I can do in that direction before the Report stage, I shall produce something. I do not say that lightly, but I must point out that I shall be tackling something that has been tackled by my predecessors and by myself on previous occasions without being able to find more than the particular concession I have mentioned. I shall look at it with a sincere desire to find something I can legitimately do and, if I can find it, I shall bring it forward with the very greatest pleasure—

Sir D. Glover: While my right hon. Friend is considering that—and I am sure that we are all very pleased indeed with his remarks—will he take professional cricketers into account? The professional cricketer receives a benefit that is not graded to any given amount. He does not know what he will receive, and it is free of tax. That should be taken into account.

Mr. Amory: I really think that my hon. Friend must allow me to play one ball at a time, if I may say so. I hope that hon. Members will not take what I have just said as a promise to produce something, but as a promise to do my best to find something if I can, and, if I can, I must say that I shall be looking in the very limited field of ministers of religion.

Mr. H. Wilson: We are coming to the point where we do not know how worth while some of these cancellarian assurances are. The predecessor of the right hon. Gentleman in 1957 gave an assurance which was much warmer-hearted than that which the present Chancellor has given. The only thing

was that he did not say that he would give an answer by the Report stage. He said he would give an answer by the following year. We never had a full report on the discussions of the problems, although I imagine that one of the big difficulties which arose from the consultations was the fact that different denominations handle this matter in a different manner, and that would create certain problems for the Treasury.
However, tonight the Chancellor has said that he will look at this matter between now and Report. This means, I take it—and I hope that representations can be made in appropriate quarters to ensure this—that when we reach the Report stage we shall have a chance of hearing a report from the Chancellor on the matter, which would presumably mean that an Amendment would be put down and would be subject to debate. I know that you cannot ensure that, Sir William; it is outside your control, but I am putting the point for the record.
I hope that the Chancellor will look at some of the anomalies in this matter. Some of the anomalies lead to outright hypocrisy in the matter of the taxation system. I understand that there is a considerable difference of treatment between the professional cricketer and the professional footballer. I should like to know why. This is all part of the same problem.
Secondly, to take the problem which one meets, indeed, in my own church, which I confess I do not attend as often as I ought—the resignation of the minister who has gone to other work after years of very good service. If, when he goes, the members of the church present him with a cheque or some other gift out of the love and affection which the congregation bear to him, that gift, I understand, is tax-free. If, on the other hand, by some careless drafting on the part of the church secretary—which I am sure would not apply either in the case of the church where my hon. Friend the Member for Gower (Mr. I. Davies) is secretary or, indeed, the church of which I am speaking—the cheque were handed over to the minister with a note saying, "Out of consideration and thanks for the years of faithful service rendered to this church," I think it would be taxable. It seems anomalous that the question whether a fairly heavy rate of tax is


levied should depend on a consideration of that kind.
One can see the difficulties—they have been mentioned by previous Chancellors—about the different denominations. When a denomination pays the whole of the income in the form of a regular weekly or monthly cheque—and even these weekly or monthly cheques fall behind in their payments, like Labour Party agents sometimes—full tax is paid. But in those Churches where there is an Easter offering or some other kind of offering, it would obviously be unfair if they became completely tax-free while other denominations paid in full. Therefore, the matter has got to be looked at as a whole, as between the various denominations. I think the Chancellor has got his work cut out between now and Report. I hope he will look at this matter constructively, and I will consider these various anomalies which have been raised.
I think it was the object of some of us on this side of the Committee to encourage hon. Members to back their eloquence with a little physical exercise. We were proposing to give them every facility to record their numbers in the manner prescribed by the House, but I should think that in view of what the Chancellor has said, it might be inappropriate to indulge in these activities tonight. However, in view of the great enthusiasm shown by hon. Members tonight, not to mention the threats of the hon. Member for Ormskirk (Sir D. Glover) and others, we hope that we shall have an opportunity in due course, should the Chancellor disappoint the highest expectations which have been expressed, to test how far these speeches—which will read very well in the local Press and will obviously make a very nice after-sermon point of conversation next Sunday—are matched by a sincerity which would justify a walk through the Division Lobby. We are denied that opportunity tonight, I think quite fairly, but another time will come.

Sir C. Mott-Radclyffe: While I am personally grateful to the Chancellor for his promise to look again between now and Report to see what can be done, I want to put this point. I quite see the difficulty about the example which the Chancellor quoted, of the minister of religion whose sole income—I think he gave the figure of £800—was derived

from voluntary contributions, but that does not deal with the problem raised by the new Clause—Easter Offerings—in the name of my hon. and gallant Friend the Member for Cheltenham (Major Hicks Beach). No incumbent's sole income is derived from the Easter offering, and this is a problem I wish to ask the Chancellor to address himself to between now and Report.

Mr. Amory: I will, but I do not think there is any great hope of finding a fair solution by dealing with Easter offerings alone. There are so many other kinds of offerings at other times of the year and for other reasons. My present feeling is that one would have to look at the matter more broadly.

Mr. Hendry: In view of the assurance—

Dame Irene Ward: May I have a go?

Mr. Hendry: rose—

Dame Irene Ward: On a point of order. Is one not entitled to an opportunity? I rose at the same time as my hon. Friend. The Chairman does not know that I was not concerned in the withdrawal of the Clause. It has always been the prerogative—

The Deputy-Chairman (Major Sir William Anstruther-Gray): Order. I must ask the hon. Lady to recollect the rule of the Committee. The Chair has the right to call any Member who catches the eye of the Chair. The hon. Member for Aberdeenshire, West (Mr. Hendry) rose and caught my eye and I called him. I now call Mr. Hendry.

Mr. Hendry: rose—

Dame Irene Ward: If he withdraws the new Clause now—

The Deputy-Chairman: Order.

Dame Irene Ward: I do not think it is a bit fair.

Hon. Members: Do not withdraw it.

Dame Irene Ward: It is not fair. It is not in accordance with the rules of the Committee.

Mr. Hendry: I appeal to the Chair for guidance on that. What I was about to say was that in view of the assurance—

Dame Irene Ward: It is not an assurance; that is exactly what it is not.

Mr. Hendry: In view of the statement made by the Chancellor, I am prepared, with permission, to place myself in his hands between now and Report.

Mr. Geoffrey Hirst: Heaven help you.

Mr. Hendry: In my opening speech I said that if the Chancellor was prepared to give an assurance I would consider withdrawing my Clause. Although he has not given that assurance, he has gone a long way towards it, and I beg to ask leave to withdraw my new Clause on the distinct understanding that, if the Chancellor does not accept the principle and produce something on these lines on Report, I reserve the right to raise it again.

Dame Irene Ward: My hon. Friend will not get the chance.

The Deputy-Chairman: Is it the Committee's pleasure that the Motion be withdrawn?

12.15 a.m.

Dame Irene Ward: No. I was very anxious to ask my right hon. Friend whether he could kindly explain what machinery he proposes should be put into operation in order that we may know what his decision is on Report. I have been quite a long time in the House of Commons and I have always been interested in the technique that is used when assurances are given that something will be examined—which, of course, I accept from my right hon. Friend. But suppose that on consideration my right hon. Friend does not find a way to fulfil the pledges which he gave the Committee tonight. Unless there is some Amendment on the Order Paper on Report there will be no opportunity for the House to express its views on the matter. Although it will be possible to raise the whole question again on Third Reading, the opportunity to register a vote will have passed. How does my right hon. Friend propose to give the House an opportunity of discussing this matter and of registering a vote if he has to reject the pledge he has given?

Sir D. Glover: Could my hon. Friend the Member for Tynemouth (Dame Irene Ward) remove one possible cause for

misapprehension? Nobody has spoken more strongly than I on this Clause, but it is entirely wrong to say that my right hon. Friend the Chancellor of the Exchequer gave a pledge. He said that he would look into this matter. It would be quite wrong if it went on record that it was thought he had given a pledge.

Dame Irene Ward: My right hon. Friend gave a pledge that he would look at the question. I did not say that he gave a pledge to accept the suggestion. I am sure that my right hon. Friend would be the first to agree that he gave a pledge to examine the whole matter in the light of what has been said from both sides of the Committee. I do not think that there can be any dispute about that. But if, after examination, my right hon. Friend has to reject the implications in the sympathetic way in which he received representations tonight, on the grounds of impracticability, what is to happen? Perhaps the House could help him on the question of practicability. It is not only from the mind of the Chancellor or of the Treasury that ideas come forward. Other people can have ideas as well as Chancellors of the Exchequer. All I ask is that my right hon. Friend should explain to the Committee how the House will have the opportunity to discuss the matter if on examination he finds he cannot fulfil the expectation he left in our minds that if he can find a practicable way he will do so.

Mr. Amory: I am afraid that I cannot help much about what hon. Members may decide to put on the Order Paper on Report or about whether a Motion which they may put down will be in order. I must confine myself to the assurance which I have given, which is that I shall personally examine this problem with a sincere desire to find a solution at any rate in the direction about which my hon. Friends and hon. Members opposite have expressed such strong views in the debate. If hon. Members think back they will conclude that I do not give that kind of assurance lightly, and I would not give it if I was not going to do my utmost to find a solution. In so far as I find a solution I shall myself have done something on Report which will provide a basis for discussion.

Mr. Hirst: I accept the sincerity of what my right hon. Friend has said. I


accept it absolutely. Of course I do, but some of us are reasonably experienced in these things in this Committee and we know the mechanics are difficult. My right hon. Friend has given an assurance that he will look into this. One would have imagined, of course, that after all the previous debates in previous years on this matter, and since two new Clauses upon it are upon the Paper, he would have done a good deal of looking into it before he came today. I am sure he has done. A good deal of his speech was an echo of the speech of my hon. Friend the Member for Wolverhampton, South-West (Mr. Powell), whom I respect exceedingly highly, though I hope he does not expect me always to agree with him. I agree with him a tremendous lot—more, perhaps, than some people—but there are occasions, and this is one, when I do not.
My right hon. Friend has given an assurance he will look into the matter. Of course, he will, but, as my hon. Friend the Member for Tynemouth (Dame Irene Ward) said, there are difficulties. It is one thing for the Government to put down an Amendment on Report. That is certain to be called by the Chair, but normally—although I cannot speak for the Chair, naturally—when a matter has been fully discussed in Committee on the Finance Bill, although it is in order for a private Member to put down an Amendment on Report, then at that stage there is not a hope of its being called—not a hope. I should not like to predict or challenge a future decision of the Chair. That would be most improper of me, but experience leads us to believe that will be the case.
I do not say that my right hon. Friend is taking advantage of that, but the fact is that this is an easy way out of the job, and I do not think that that easy way is very satisfactory. If only he had said, "I accept the principle. A case has been made out for discrimination." Nobody has doubted that it is discrimination. We do not argue that it is not. If he had said," I accept the principle, but I cannot tonight say that the words of the Clause are the right ones," it would have been different. He has not accepted the principle. He has not accepted the principle one little bit. All he has done is to give an assurance he will look at it, and he

ought to have looked at it ten times over before he came here. Personally, I am not satisfied. The Committee as a whole is prepared to leave it, but I want to go on record as saying that I am not satisfied.

Mr. H. Wilson: This is, of course, the easy way. The hon. Member for Shipley (Mr. Hirst) is quite right. If it had not been far our intervention in the speech of the hon. and gallant Member for Cheltenham (Major Hicks Beach) the Committee would probably have not got as far as it has, because the Chancellor would not have been here, and the Financial Secretary, who has a nice tight little brief from the Inland Revenue, would have given a hundred reasons why it could not be done and not one of the good reasons why it could, and we should have had an even bigger split on the benches opposite than we have had in the presence of the Chancellor. [HON. MEMBERS: "Oh."] Oh, yes. If anything like this had happened in the Labour Party there would be big headlines about it tomorrow. We have had far smaller occurrences than this that had made the headlines. It was, I think, due to our pressure that the Chancellor came in.
He is here, and he is to some extent responsive to pressure behind him—up to a point: it does not last very long—and he has given this assurance. I agree with the hon. Member for Shipley that it costs nothing to give that assurance, and I agree with him that the Chancellor, having seen the Clause on the Paper, should have given personal consideration to the matter before the debate.
This is not so much to look forward to between now and Report, but where I take issue with the hon. Member is this. He gave the impression, which I thought rather less than fair to the Chancellor, that the Chancellor by doing this would ride off on Report on the virtual certainty that if he did not put a Clause down there would not be one. What will be called on Report is entirely a matter for Mr. Speaker.
We have had the Chancellor's assurance that, if he decides to take any action, he will put down a new Clause on Report. There is no doubt that that would be called. However, if he decides that nothing can be done, then, although we


cannot anticipate Mr. Speaker's discretion, when an assurance has been given by a responsible Minister in Committee that he intends to study something again, I have never known a case when facilities on Report have not been given.

Mr. William Ross: That may well be so if the Clause is withdrawn, but as a result of the intervention of the hon. Lady the Member for Tyne-mouth (Dame Irene Ward) the Committee will now have to take a decision, whether we like it or not, and that makes a difference to whether we shall be able to discuss the matter on Report.

Mr. Wilson: Personally, I am very doubtful about that. My hon. Friend has made a rather narrow point and perhaps it has some validity, but one understands that those responsible for deciding these matters decide them in the light of what the House of Commons clearly wants and it is clear that hon. Members want another opportunity of holding the Chancellor to account, I hope more briefly than tonight, if he decides that he can do nothing about this matter.
Therefore, I hope that the hon. Member for Shipley will not be too unfair to the Chancellor about it. I agree that it was an easy way out, but the time to judge that is on Report.

Question put and negatived.

New Clause.—(ALLOWANCE FOR TRAVELLING EXPENSES.)

In connection with any assessment for liability for income tax, where a person proves that he has incurred expenditure by way of fares paid on public transport in travelling between his normal residence and the place where the income is earned he shall, subject to a maximum of one hundred and four pounds in any one year, be allowed such expenditure as an expense wholly, necessarily and exclusively incurred by him in earning such income.—[Mr. Marlowe.]

Brought up, and read the First time.

Mr. Anthony Marlowe: I beg to move, That the Clause be read a Second time.

The Deputy-Chairman: It may be convenient to the Committee also to take the new Clause in the name of the hon. Member for Stoke-on-Trent, South (Mr. Ellis Smith)—Travelling expenses.

Mr. Marlowe: I had understood that that was the intention. That is verbatim

the same as mine with one exception with which I shall deal in due course.
I hope that the Clause has been drawn with sufficient clarity to make its purpose perfectly plain. The object is that people who incur expenses travelling to and from work should be able to claim at least some of that expense, up to a maximum of £2 a week, as an allowable expense.
During the course of our debates on the Finance Bill we have considered a number of cases in which people are allowed to deduct expenses incurred in their business. Perhaps the most attractive feature of my Clause is that it is wholly logical, whereas the attitude hitherto adopted by the Inland Revenue in respect of such expenses has been wholly illogical.
For instance, we have discussed the case where a business man might take a prospective customer out to lunch, perhaps an expensive lunch, because it is intended to induce business, but that might not be the result and business might not eventuate as a result of a lunch on an expense account. However, the business cannot begin until the people who work in it get to the office, factory, or wherever the business is conducted. This problem has become more and more important in recent years owing to the considerable increase in fares which people have to pay to get to and from work. There is now a good case for allowing the ordinary working man and woman some kind of expense allowance in respect of that expenditure without which the income could not be earned.
12.30 a.m.
The Inland Revenue quite wrongly adopts the principle that people live on the job, but, of course, they do not. More and more, owing to the changing circumstances of the day, people have to live further and further away from their work and have to get to it in the morning and home again in the evening. This involves them in a very important item of expenditure.
It has been said in relation to the last new Clause which we were debating that it is a hardy annual. My Clause, I think, has the merit of being on the Notice Paper for, as far as I know, the first time on record, and certainly it could not be called a hardy annual. But


it does not, I believe, introduce a new principle.
I know that it is the practice of the Treasury when it wants to resist a suggestion of this kind to say that it opens a door. As we all know, officials in the Inland Revenue are terrified of opening doors because they are in perpetual terror of what they may find behind them. But, in fact, this principle has, I believe, been accepted in one respect before. Perhaps my right hon. Friend will be able to inform me about this. I have not checked it myself, but I believe that when people were directed under the Defence Regulations to work in particular places it was accepted that the expense of their travel to and from their home and the place to which they had been directed was an allowable expense.

Mr. Douglas Houghton: Up to a limit.

Mr. Marlowe: Yes, up to a limit.

Mr. Houghton: The limit was lower than the one proposed in the hon. and learned Gentleman's Clause.

Mr. Marlowe: Times have changed and fares have gone up a good deal since then. I do not think that the limit which I have suggested is an unreasonable one. The intervention of the hon. Gentleman does not meet the argument which I was making, which is that the principle has been accepted. What, if any, limit there should be is, of course, a matter of argument. I was only propounding the idea that the principle had already been accepted. I take it from what the hon. Gentleman says—and he has more knowledge of these affairs than I—that there was a limit. But that does not affect the principle of whether such an expenditure should be an allowable expense or not.
If that principle was once accepted merely because people were directed under the Defence Regulations to work in certain places, then I think that one has to recognise that the circumstances in which people have to travel long distances from their homes to their work today are just as compulsive as any Defence Regulation ever was.
It is quite impossible for people to find residential accommodation, particularly in the big cities, and very often

impossible for them to find it in the factory areas. They often have to live many miles away from where they earn their income. It is a vital part of the earning of the income that they should travel to and from the place where the income is earned. If once the principle is accepted, then I think one comes only to the question, which relates to the intervention made by the hon. Member for Sowerby (Mr. Houghton) a few moments ago, of what, if any, should be the limitation.
The other Clause on the Notice Paper, to which you referred, Sir William, exactly reproduces the wording of my Clause, but omits the upper limit of £104 a year which I introduced into mine. Without any reference to the laws of copyright, some hon. Gentlemen opposite have exactly plagiarised my Clause, subject to the question of amount. I am sorry to see that none of those hon. Gentlemen whose names appear on the Notice Paper appear to be present tonight to argue the case for it. Therefore, I shall have to argue for them in respect of so much as I agree with and against them in respect of so much as I disagree with.
Hon. Members opposite who have put their name to the new Clause—Travelling Expenses—accept the principle in toto; they say that there should be no limit. Having regard to the intervention of the hon. Member for Sowerby a moment ago, I do not think he would agree with that. I think he agrees that if we have this kind of allowance there must be a limit. He and I are at least in agreement on that point. Without a limit we should arrive at the most ridiculous situation. We could have film stars crossing the Atlantic half a dozen times a year, with expenses of £300 or £400 a time, charging those expenses as allowable for tax relief, and business tycoons going on the "Queen Elizabeth" to New York and charging the cost as an expense.

Mr. Houghton: I rather think they charge that now, but we will not go into that.

Mr. Marlowe: The hon. Member may well be right, but that point is not related to the Clause. It is because I want to concentrate on the main purpose I have in mind that I have put a limitation in the Clause. It is to help the working


man; it is not to help the wealthy people who may be involved in considerable expense in carrying out business transactions, even if they are only travelling between London and Manchester, Glasgow and Liverpool. The Clause seeks to help the working man who goes to and from work every day. I would have thought that a sum of about £2 a week was probably a reasonable amount.
The hon. Member for Birmingham, Northfield (Mr. Chapman) put down an Amendment to the Clause, and I will deal with that in a moment, because it also relates to the amount. He sent me a message earlier this evening to say that he would be unable to be present, and asked me to apologise to the Committee for his absence, and I gladly do so. At the same time, I must deal with his Amendment. It suggests a disregard—

The Deputy-Chairman: The Amendment has not been selected, so the hon. and learned Member for Hove (Mr. Marlowe) is not required to deal with it.

Mr. Marlowe: Without dealing with it, perhaps I may make some comment on the amount. Some people think that the first £26—on the basis of 10s. a week—should be a disregard. The argument in favour of that contention is that it is too fiddling for the Inland Revenue authorities to have to sort out the smaller amounts that people spend on bus and tube fares in getting from the suburbs of outer London into the City. That seems to be the characteristic Socialist philosophy of pretending to help the little man and yet trying to do him down at the same time. My object is really to help the little man.

Mr. Houghton: On a point of order. A moment ago, Sir William, you said that the Amendment in the name of my hon. Friend the Member for Birmingham, Northfield (Mr. Chapman) had not been selected, and therefore the hon. and learned Member for Hove (Mr. Marlowe) was not required to deal with it. In my submission, he is dealing with the content and purpose of the Amendment in an extremely derogatory fashion, rather suggesting undesirable motives in making a proposition of this kind, when the matter is not before the Committee. Is it in order for the hon. and learned

Gentleman to continue to harp on the content of an Amendment which is not before the Committee?

Mr. Marlowe: I have no wish to make any derogatory observations about it. I was not dealing with the Amendment. I was trying to deal with the argument which might be advanced, if there is to be a limit at all, about whether it should be a maximum or a minimum. I can see there might be an argument for a disregard of some sort, because the amount would be too small for the Inland Revenue to deal with, but I do not think there is any substance in that argument. The Inland Revenue would know where a person lived and worked and approximately what it would cost for the person to get to and from work. In the case of a man who lives in Battersea, or Wandsworth, or Balham, Streatham or Hampstead, or anywhere in the suburbs of London, and has to travel to the City to work, there would be no great difficulty about the Inland Revenue getting a good idea of the cost of doing that.
I suppose it is arguable that there might be the occasional dishonest claim, but by and large the ordinary English citizen is pretty honest and I do not think the Treasury would suffer any substantial loss. On the question of a possible minimum as a disregard, suppose it to be 10s., I would put the case another way and suggest that the Inland Revenue should allow 10s. to any person who is earning money and has to travel to do so, without proof of expenditure.
I think that there would have to be a maximum figure and £2 a week seems to me a perfectly reasonable figure. But, of course, the taxpayer would have to establish his claim to the allowance. That is why I have included in the Clause
…where a person proves that he has incurred expenditure…
There is one other aspect of the Clause with which I wish to deal. I have limited this to fares paid on public transport and I think that is right. It has been represented to me that I ought to have widened the scope of the Clause to include people travelling in their own motor cars, but for a number of reasons I do not think that would be right. One reason is that many people who


travel to and from their work in motor cars already have an expense allowance from their employer and there would be difficulty in sorting out particular cases. There is also the overriding consideration that to allow a rebate of £104 a year to anyone using his car to travel to and from work would amount to subsidising the private motorist and I should not feel justified in asking the Inland Revenue to allow that.
There are other considerations. Such an allowance as I suggest might encourage some people to leave their cars at home and travel by public transport in order to obtain the benefit of the allowance. That would have the advantage of keeping some cars off the road, which would be a benefit to everyone. At the same time it would help public transport. I am sure that British Railways and London public transport could do with that additional benefit. It was with those considerations in mind that I limited the Clause to public transport.
My hon. Friend the Member for Hendon, South (Sir H. Lucas-Tooth) says, "Not the rush hour", and I agree that that is a problem, but the rush hour is also made insupportable by the number of cars on the road, and no doubt if some of these cars were removed from the road at the rush hour, the buses would have a little more room in which to move.
But that is not the main consideration of the Clause. The main consideration is that many people are being put to considerable expense in travelling to and from work and, while many in business are able to claim relief on expenditure which they have incurred in their business, some of it, we often think, not wholly necessary, people are unable to claim in respect of travel which is obviously vital, because without it the work cannot be performed.
One aspect which should interest the Government concerns the earnings rule for those drawing retirement benefits. The maximum allowed under the earnings rule is £3 10s. a week. There must be many retirement beneficiaries who will not go to work because out of the maximum of £3 10s. to which they are limited they would have to spend £2 on travelling; and it is not worth their while to spend £2 to earn £3 10s. In the interests of production the Government should

do all they can to encourage these people to go to work.
The main object of the Clause is to meet a situation which has arisen because of the increasing cost of fares on public transport for people who are paid weekly wages. It would help many of these people, including season ticket holders who pay large sums every year for travelling to and from their work, if the Clause were accepted.

12.45 a.m.

Mr. Loughlin: I appeal to the Chancellor to look a little kindly on this proposal, because his sympathetic consideration would help to redress what is becoming an injustice to a large proportion of the workers.
I want to deal briefly with two aspects. The first is that in many areas we are encouraging workers who are becoming redundant, because of the changng pattern of industry, to travel daily from their homes to a place of work possibly 20, 25 or 30 miles away and back again. In my constituency, where this problem has arisen in an acute form, over 2,000 people travel from the Forest of Dean to Gloucester every day, at their own expense, in order to get a job. Some of the workpeople who have to travel from parts of my constituency to Gloucester are having to pay—I have checked the figures—between 15s. and 30s. a week in travelling fares alone. That constitutes a substantial reduction in their wage. One way of combating it is to ensure that sufficient applications for wage increases are put in to cover the cost of travel. I am sure that the Chancellor of the Exchequer would not desire that to be a cardinal principle of trade union activity in the areas involved. It does not apply to my constituency only. It applies to an increasing number of areas.
My second point is the increasing cost of travel for workpeople in the larger cities because of the redevelopment of cities in the last few years. I know that it is customary to refer to the City of London and the distances which are travelled by workpeople living outside the City who come in to the City to work. It applies equally to cities like Birmingham, where I live, where wholesale redevelopment is taking place, and there is a movement out from the industrial parts of the City to the suburbs at a considerable cost in travel fares for the workpeople moved out. When


there is a movement of people from industrial areas to the suburbs, there is inevitably an increase in the rent costs of those people. Therefore, when they have to bear additional travelling costs, it is at least fair to suggest that it is an injustice that they should have to bear the additional cost without relief by way of taxation.
I ask the Chancellor of the Exchequer to examine this. I know that he has pressure from all types of people and all groups of people when he has to look at the effects of his Budget. This is a serious injustice. Some people can manage to ensure that the Inland Revenue pays a very high proportion, if not the whole, of their travelling costs. I sometimes think that there is no substance in the argument that what is good for Jack is good for the master. In this case we think that what is good for the master is good for Jack. The only thing that we can ask the Chancellor to do is to give it sympathetic consideration, because by and large—I am not paying him any compliments—if he feels an injustice has been done it ought to be undone. I ask him on the two points I have made to give serious consideration to the Clause.

Mr. Amory: I am unable to accept the proposal of my hon. and learned Friend the Member for Hove (Mr. Marlowe), who was supported by the hon. Member for Gloucestershire, West (Mr. Loughlin), both on grounds of principle and cost. In general, under the present law there is no Income Tax allowance for travelling between home and work. That applies to both Schedule D and Schedule E. It is quite essential to maintain that principle. There is one exception, which was pointed out by my hon. Friend the Member for Hove. That is Section 159 of the Income Tax Act, 1952.

Mr. Houghton: The 1942 Finance Act.

Mr. Amory: It is in the Finance Act, 1942, and also in the Income Tax Act, 1952. It dates from 1940 or 1942. An allowance was then given of up to £10 for extra travelling costs resulting from a change of residence or place of work due to the circumstances of the war. That was a temporary allowance that is gradually tapering off now. The

Royal Commission considered that, and recommended that the allowance should be repealed, as it considered that as a permanent arrangement it could not be justified.
The Royal Commission very carefully considered this whole question, and decided that, in logic, the claim for an Income Tax allowance on travelling failed because the profits or remuneration were earned at the place of work. My hon. and learned Friend said that the Inland Revenue authorities regarded people as living at their work. It is not really that, but the Inland Revenue authorities regard such an Income Tax allowance as inappropriate for any part of the ordinary cost of living.
A second conclusion of the Commission was the extreme complications—

Mr. Marlowe: The illogicality of this can best be emphasised by pointing out that in certain circumstances the Inland Revenue insists on a man living in two places at once. If he says that his income comes from different sources and from different places, the same principle is applied, and the Inland Revenue insists that he lives in two places at once, which is nonsensical.

Mr. Amory: It is not that. The Revenue adheres to the principle that an Income Tax allowance is inappropriate for travelling to work. There are some modifications to that rule in the case of those who hold a number of different appointments.
The second conclusion of the Royal Commission was the extreme complications that would ensue if allowances for the cost of travelling to work were made a permanent arrangement. The Commission pointed out that most people have some element of choice in where they live and where they work. In fact, in many cases there is a wide element of choice. Some people decide to live further away and, by doing so, obtain a lower cost of living, or certain amenities. Others live closer but, in doing so, incur a higher cost. Since the tax system does not take account of variations in living costs, the Royal Commission considered that it would be wrong and inappropriate that an allowance should be given for travelling when that factor is so much bound up in other factors.
Another conclusion was that while the commission was quite satisfied as to the correctness of this general rule it recognised that with the post-war housing shortage the freedom of choice that exists in theory is, in many cases, quite seriously limited, but the Commission concluded that, even so, to identify and assess the cost in which there is no choice whatever to the individual as to where he lives or where he works, would impose an impossible administrative burden on the Revenue authorities.
I am not sure that I agree with my hon. and learned Friend when he says that if one were to give an allowance for travelling it would be entirely fair to omit travelling by car which, in some cases, is the only practical way of getting to work. Apart from this question of principle, I do not think that we could breach this principle, and start giving an allowance for travelling to work.
Apart from that, I could not possibly accept the proposal on the ground of cost. I cannot tell my hon. and learned Friend exactly what the proposal would cost, but I can tell him that it would run into tens of millions of £s—and, I would think, into many tens of millions. In any case, I am satisfied that it would impose a charge on me that I could not possibly accept this year. Therefore, on grounds both of cost and of principle, I am afraid that I cannot accept this proposal.

1.0 a.m.

Mr. Houghton: When I perused the names of the hon. Members who support this new Clause and saw the name of the hon. and learned Member for Hove (Mr. Marlowe), I thought at first that this was perhaps a constituency interest. After all, there are a number of the hon. and learned Member's constituents who travel, I understand, daily from Hove to London and who would certainly benefit from the concession that he seeks. I am not complaining about that. Indeed, when I looked further down the list I thought that perhaps Cheltenham might come in it; Nottingham I thought was doubtful; Totnes probably out of the question; Portsmouth probably in it; but Hexham, certainly not.
There is no doubt that the Chancellor is right to urge the Committee to approach this new Clause with great caution. I was rather surprised that

the hon. and learned Member did not refer to the Royal Commission's examination of this proposal and mention what it said in paragraphs 236 and 237 of the Report. I apologise for the intervention that I made a moment ago. I failed to realise when the right hon. Gentleman was speaking that Section 26 of the Finance Act, 1942, had become Section 159 of the Income Tax Act, 1952.

Mr. Amory: It is extremely seldom that the hon. Gentleman slips up. I have never known him do it before.

Mr. Houghton: I am obliged to the right hon. Gentleman. It was a wartime concession given over a much wider field than those who are directed under the Defence Regulations. It was very small, as the Chancellor has just mentioned. The limit was £10 a year. It was administratively very difficult to apply, and the Royal Commission recommended in paragraph 237 that that war-time concession had outlived its usefulness or its justification and should be repealed. That is the position as the Royal Commission left it.
The Chancellor has drawn attention to the restriction in the new Clause to fares paid on public transport. I certainly think that, in view of present traffic conditions, any discouragement to use private transport and any encouragement to use public transport might be welcomed as a means of alleviating a good deal of traffic congestion, because individual persons occupying large-sized motor cars take up an awful lot of space in a crowded city. But whether it is fair to ask the Chancellor to help solve the problems of his right hon. Friend the Minister of Transport I am not sure.

Mr. Marlowe: I was not suggesting that. I was saying that this would be a consequential result.

Mr. Houghton: Yes, a by-product which the hon. and learned Gentleman thought fit to mention as an attractive aspect of his new Clause.
Reference has been made by the hon. and learned Member and the Chancellor to the use of the motor car. Neither of them mentioned the use of the bicycle and the new type of minicar, "bubble cars," Lambrettas and vehicles of that kind which are now becoming much more widely used for getting to and from


work. It would be very difficult to make this concession to those who use public transport and to deny any relief whatever to those who might necessarily have to use their own transport to get to and from work. Consider, for example, night workers, many of whom feel a certain grievance about the rules as they now are. Frequently there is no public transport that they can use and they have to use their own, but no allowance is given. It would be very hard to admit fares paid on public transport for day workers and to deny any relief to shift and night workers who use their own transport.
If, however, we were to include in a relief of this kind all types of transport I would be bound to warn the Committee that the problems of administration would be positively frightening. I have said earlier that, in my view, it would be in the interests both of the individual taxpayer and of the Inland Revenue if the area of conflict between them could be reduced, and that more concessions should be given by flat-rate reliefs, with rougher justice, maybe, rather than doing on a large scale the meticulous examination of individual claims leading to the many difficulties which I need not dwell upon.
But surely in this connection literally millions of claims for relief on these grounds would be a formidable prospect for the administration; indeed, it is not too much to say that the Inland Revenue would virtually lose control over the validity of the claims made. The Revenue is almost in that position now regarding expenses claimed as being wholly, necessarily and exclusively incurred in the performance of an office. What it would be like if the area were widened to this extent I can only leave to the imagination of the Committee.
Finally, the Committee should know that those who gave evidence to the Royal Commission on behalf of the trade union movement were not in favour of a concession of this kind, because they thought that it would be opening the door to considerable abuse, would favour the better-off taxpayer in many cases and—and this is the classic argument used and demolished on these occasions—would bring no benefit to those workers who, because of their family responsibilities or otherwise, were not liable to tax. This is a tre-

mendous problem and not one which I would suggest could be settled at this hour of the morning on a Clause of this nature.
Without for a moment regarding what the Royal Commission said as the last word, I suggest that it would need more careful examination before we could begin to make concession on travel to and from work. My hon. Friend, the Member for Gloucestershire, West (Mr. Loughlin), drew attention to the special hardships of people virtually forced to move because their work has moved. It may be necessary in due course to consider those special problems.
Another factor we must take into account in a changing situation is the rising cost of travel. It is a strange phenomenon to me that there is greater prejudice against a rise in the cost of transport than there is against a rise in the cost of consumer goods and other services. It may be that people resent more having to pay more to get to work than they do an increase in charges in other directions. I do not pretend to know the answer, but it is remarkable that an increase in fares should meet with sharp objection from many people when other price increases are apparently not so deeply resented. This is hard on the transport industry which is having to pay its way, and the workers in it are demanding their reasonable standard of life alongside workers in other industries.
Taking all in all, I am afraid I cannot offer to the hon. and learned Member for Hove any force of support for his Clause from this side of the Committee. I thought a moment ago I should have only one hon. Member behind me when I saw the hon. Member for Gloucestershire, West, on whose support, from what he said, I could scarcely rely at all, but I am a little more reinforced at the moment. I think I must offer the Chancellor all the support he feels in need of at this moment in saying that this is not a Clause we could recommend the Committee to accept in its present form, while we certainly think it is a matter that should be kept under review and re-examined in its wider aspects and looked at with close attention to many of its administrative and other difficulties. Perhaps we could come again to this matter when we have more time to consider it.

Mr. Ray Mawby: The hon. Member for Sowerby (Mr. Houghton) referred to me among other hon. Members as supporting the Clause and he tended to suggest that as Totnes is far away from London there was no constituency interest in the Clause for me. I do not consider, as the hon. Member seemed to suggest, that London is the centre of England. I have a constituency interest in the Clause, not because my constituents want to travel to London each day to work, but because they have to travel considerable distances to their places of employment.
We should always remember that London is not the centre of England. A great deal of industry is carried on in other parts of the country. Heaven help the country if that were ever not the case. It is largely because a number of my constituents travel considerable distances to carry on their day-to-day affairs that I put my name to the Clause. But I thought that the Chancellor's argument was a reasonable one and therefore I should not be prepared to press the Clause to a Division.

Mr. Houghton: I apologise to the hon. Member for mistakenly thinking that people came only to London to work. As a Derbyshire man representing a Yorkshire constituency I have perhaps a higher opinion of London as a centre of civilisation and of activities than it is probably entitled to. Some of the hon. Member's constituents probably travel to Hebden Bridge, which is in my constituency.

Question put and negatived.

Mr. H. Wilson: I beg to move, That the Chairman do report Progress and ask leave to sit again.
I do this without expectation that the Motion is likely to be supported by the Chancellor. After the point which has led me to move the Motion has been dealt with, I shall be happy to withdraw it if that is the wish of the Committee. There are still a considerable number of new Clauses on the Notice Paper. If they are to be dealt with thoroughly we shall sit very late. Conscious of this, my hon. and right hon. Friends and myself have considered it desirable to desist from moving some of the new Clauses standing in our names.
I announce this in advance only so that it might make the job easier for the

Chair, and I indicate that we are doing this in the very considerable hope—I cannot put it any higher—that should we re-table these Clauses on Report they might be selected on that occasion. I know that that is a question which does not lie within your discretion, Sir William. I cannot ask you to indicate whether our hopes are likely to be justified or not, but in doing this for the general convenience of the Committee we naturally hope that this will be counted favourably when the selection of new Clauses comes up on Report.
There is, for example, the very important new Clause—Exemption from ad valorem stamp duty of conveyances or transfers in satisfaction of certain legal rights—which raises some very fundamental questions of Scottish law and which I should be very happy to explain to the Committee if I understood it.
1.15 a.m.
We similarly shall not be moving our new Clauses—Increase of relief in respect of children not over the age of eleven—Increase of personal reliefs—Increase of a personal relief—which I understand, were to be debated together. They raise some very important questions, I am sure the Committee will agree, of personal reliefs. We feel they would be better debated in the full light of day.
We did give the Patronage Secretary an assurance that, as far as we were concerned, we were fully prepared to cooperate in ensuring that the Committee stage would be completed at this Sitting, and we certainly have no intention of going back on that. Indeed, by the action I have just announced to the Committee I think we are not only helping to ensure that the Patronage Secretary gets his Bill tonight but that he and others, not excluding ourselves, will get to bed a little earlier than might otherwise have been possible.
I ought to have mentioned that our new Clause—Repeal of television duty—is also one we think should be deferred to a later stage.

Mr. Amory: I should like only to say in regard to what the right hon. Gentleman the Member for Huyton (Mr. H. Wilson) has said that I am grateful to him for the action he has proposed because, although I have no control of what new Clauses are called on Report. I believe


that should his new Clauses be called we should be able to give them better consideration on that occasion than we should have been able to give them had we devoted our attention to them this morning. I should like to say that I think that he and his right hon. and hon. Friends have fully carried out the understanding we reached with them last night, that they would help us to complete the Committee stage tonight.
I should imagine that the right hon. Gentleman will shortly withdraw from the Chamber, and my hon. Friends and I will plough on with our furrow and try to complete our business. If the right hon. Gentleman is going to remain with us to help us, his presence will be very welcome, but I think that the right hon. Gentleman, having made his proposal, will probably now wish to withdraw his Motion.

Mr. Wilson: I would just make this comment, that should I withdraw in the course of the subsequent debates on the remaining new Clauses I shall not withdraw far. I certainly shall not be going home—not till the Chancellor does. If I am absent for a few minutes it will be because of my deep concern for the Treasury's revenue from the Tobacco Duty and because the rules of this Committee make it impossible for me to help the Government with that matter here now; so I shall be out a moment or two putting that matter right.
The Chancellor's kind reference to our action does embolden me, before I seek leave to withdraw my Motion, to hope that perhaps some hon. Gentlemen opposite who have got new Clauses on the Paper may like to consider their position. I am not making an appeal to them. I think they have every right to move their new Clauses, if they are selected. I am sure many will. I am certainly not doing this in any spirit of saying to them that it is their duty to follow my suggestion—it certainly is not their duty—but from the point of view of sheer self-interest, which is an argument which may appeal to some of them, because there is something to be said for debating some of these complicated Clauses by day rather than by night. There are many advantages in that course from the Parliamentary and the extra-Parliamentary point of view.

So perhaps our example will be followed; perhaps not.

I beg to ask leave to withdraw the Motion.

Motion, by leave, withdrawn.

New Clause.—(SURTAX: MARRIED WOMAN'S EARNED INCOME.)

The first two hundred and fifty pounds of a married woman's earned income shall be excluded from the computation of the total joint income for purposes of surtax.—[Sir O. Prior-Palmer.]

Brought up, and read the First time

Brigadier Sir Otho Prior-Palmer (Worthing): I beg to move, That the Clause be read a Second time.
The history of this tax arrangement is that from 1799, when it was first introduced, women were treated for tax purposes as imbeciles and lunatics and as if they had no personal rights of their own. It was introduced at a time when it was not the fashion for women to work and when men had full charge of all the financial matters in the family.
As we all know, the situation today is totally different from that. Very many women work and tax arrangements below Surtax level actually encourage women to go out to work. I hope that, unlike what happened on the last occasion when I raised this matter, hon. Members opposite will not say that the Clause is not drawn wide enough and that it should concern all tax ranges. If separate aggregation took place below Surtax levels, married couples would be worse off because they would lose money on their allowances and the Exchequer would gain. It is a question not of separate aggregation but purely of Surtax.
The situation is that if a husband is earning a certain amount of money and his wife goes out to work and earns a reasonable salary, she probably pays Surtax on the very first penny she earns. There is no doubt that that is acting as a deterrent to many married women of great ability and qualifications from giving their services to the country. Its illogicality is so absurd. Large sums of money are spent on training women teachers, scientists, doctors and dentists and then we lose their services when they get married because they cannot afford to carry on with their jobs.
As a result of raising this matter on a previous Finance Bill, I was inundated with letters from all over the country from married women giving examples of the way in which they were penalised and virtually prevented from going out to work. In this day and age, when we are so very short of scientists and technologists and when the dental profession, for instance, is so grossly undermanned, it is utterly wrong that people should be discouraged from carrying on with the job for which they have been trained at great expense.
The last time I raised this matter it was admitted by the then Financial Secretary to the Treasury that only a small sum was involved and that it would cost the country only £3½ million to implement. That is on record in HANSARD. The benefits which would accrue from adopting something like this—and, of course, I am not wedded to the wording of the Clause, which is virtually only a peg on which to hang an argument, and I would be perfectly prepared to accept his suggestion if the Financial Secretary proposed something which would have the same result—would outweigh that loss.
There is the other aspect of the matter which received great publicity on the last occasion that I raised it, but to which I do not attach very great importance. It is well known that there are cases where people do not get married hut raise families just to avoid this penal tax which occurs when an able woman wishes to go out to work.
Finally, I hope that hon. Members opposite will not bring up the argument that this should apply to all tax ranges, because it would not act to the benefit of those under the Surtax ranges: it would, in fact, act as a disincentive to go out to work. With those very few words I commend the Clause to the Committee.

Sir E. Boyle: I do not think that at this hour of the morning my hon. and gallant Friend the Member for Worthing (Sir O. Prior-Palmer) or the Committee would wish me to make a long exposition of the matter. Therefore, I will content myself with replying to my hon. and gallant Friend in a fairly short speech.
One has to remember that since the Royal Commission reported on this part of our tax system we have had the Budget of 1957, which, in my view, made

a most important reform by extending the earned income relief right up into the Surtax scale. We also had a very substantial reduction in direct taxation last year.
I think, therefore, that my hon. and gallant Friend will agree with me that the position today of married couples, where there are, perhaps, two professional people both doing jobs for the nation, is at any rate better than it was at the beginning of the present decade. At the same time, I take the point made by my hon. and gallant Friend, and I am sure that the whole Committee takes the point, that there is always the risk that Surtax liability will deter the wives of husbands with larger incomes from working and that, therefore, the country may be deprived of the services of women who are qualified scientists, doctors, teachers, and so on.
I am bound to say that in the middle of a period when we are having a rather rapid expansion of all our institutions of further education, universities and technical colleges as well, because a good many qualified women come out of these colleges, I think it very right indeed that the whole question of the taxation of married women's earnings should be very carefully considered.
I am going to make a suggestion to my hon. and gallant Friend tonight, and I word it pretty generally on purpose. I think that it would be out of the question this year to make the sort of concession that he proposes. I agree that it is not a big concession in terms of money, but in view of the concessions, the desirable reliefs, which my right hon. Friend has had to refuse this year, I do not believe that we could do this. I also think that it is a field in which we ought to do a lot of careful inquiry in order to make sure that we really are giving reliefs in exactly the right way. But I should like to tell my hon. and gallant Friend that my right hon. Friend is seized of the very great importance of the point raised tonight. Certainly between now and next year we will look at this part of our tax system very carefully. Perhaps with those words my hon and gallant Friend might be ready to withdraw his Motion.

Sir O. Prior-Palmer: The only thing that I should like to say about that is that precisely the same words were used


two years ago when the matter was then discussed. Of course, nothing has been done about it since then. There was, admittedly, a slight concession given in the last Budget.

Sir E. Boyle: There was also a reduction in the standard rate last year. The 9d. reduction has certainly some effect on the problem.

Sir O. Prior-Palmer: What I am asking for is that the benefits of the ordinary Income Tax system should be extended into the Surtax range. I hope that when we discuss these matters another year, whether we have a new Chancellor then or not, these words will be remembered and that something will really be done about the matter.
In view of what my hon. Friend has said, I beg to ask leave to withdraw the Motion.

Motion and Clause, by leave, withdrawn.

New Clause.—(DOUBLE INCOME TAX RELIEF FOR COMPENSATION PAYMENTS.)

Annuities paid to persons persecuted by the Nazis by way of compensation for loss of or damage to life, limb, health, liberty, property, or economic prospects shall, in so far as they are expressed to be payable free from taxation in Germany, be deemed to be payments of such amounts as after deduction of the appropriate German taxation would leave the amounts actually payable and shall be eligible for double income tax relief accordingly:

Provided that no person's liability to tax shall be increased in consequence of this section.—[Sir H. Lucas-Tooth.]

Brought up, and read the First time.

1.30 a.m.

Sir H. Lucas-Tooth: I beg to move, That the Clause be read a Second time.
I should like to have acceded to the plea made by the right hon. Member for Huyton (Mr. H. Wilson), more especially as he is my constituent, but as a back bencher I would have rather less security than he has if I let the opportunity pass.

Mr. H. Wilson: As the hon. Member says, I am a constituent of his, even if he does not regularly get my vote. The appeal I made was not addressed to him, or to those who have moved new Clauses. I am aware of the importance attached to this matter, not least in

the area which the hon. Member represents, and it is a quite fair Clause for him to move. It was merely a question whether he would get more publicity for it at another time of the day. I was not expecting him to withdraw his new Clause.

Sir H. Lucas-Tooth: I am grateful to the right hon. Member for the courteous way in which he has dealt with my discourtesy in dealing with his plea.
The Clause relates to the compensation paid by the West German Government to the victims of Nazi oppression. The facts about the various forms of compensation which are paid by the Germans to such victims are somewhat complicated, and some fundamental principles of tax law are involved. I do not wish to weary the Committee in any way at this time, nor do I wish to over-simplify the issue. I must try to state the position fairly, and I hope that I can do so briefly.
In a number of cases the compensation which is paid takes the form of an annuity. Most annuities, if not all, are inadequate as compensation. I am not saying this in any emotional way, but it would be true to say that any money compensation in respect of the matters for which the compensation is by way of being made would be quite inadequate. No one who knows anything of the facts of individual cases can fail to appreciate that. These annuities are inadequate simply on a strict and legal basis as compensation for the damage in respect of which they are paid, and that fact is admitted by the German authorities. They have paid a smaller sum in compensation than one would have expected, in the form of an annuity, which is then expressly made tax-free by the laws of West Germany. Why they have chosen to proceed in this manner I do not know, and I do not think it would help the Committee to speculate about it.
Unfortunately, annuities are liable to Income Tax in this country. These annuities have been charged to tax, and tax has been levied upon them. That is quite correct as the law stands. in believe that we are the only country and the world which does levy a tax on these annuities; nevertheless, I admit that in accordance with the law as it stands the tax is being correctly levied.
In 1957 my hon. and learned Friend the Member for Northwich (Mr. J. Foster) moved a new Clause seeking to exempt these annuities from British Income Tax. He did so on the Report stage of the Finance Bill of that year, and the report of the debate can be found in Volume 573 of the OFFICIAL REPORT, starting at column 1007. The House negatived that Clause without a division on the advice of the then Financial Secretary to the Treasury, my hon. Friend the Member for Wolverhampton, South-West (Mr. Powell). The gist of his argument might be summarised in one sentence from his speech on that occasion:
The underlying principle here is that there must be parity of treatment for similar income received by those who are liable to tax in this country."—[OFFICIAL REPORT, 16th July, 1957; Vol. 573, c. 1014.]
That is a perfectly sound doctrine and it was supported on that occasion by the hon. Member for Sowerby (Mr. Houghton). I agree that it would be difficult to free the pension of a refugee widow from British Income Tax and at the same time to continue to exact tax from the pension of a widow of a man who fought against the Nazis. We cannot get away from that argument. If once we infringe that principle we are opening the door very wide.
The question we have to consider in this context is whether these annuities are similar to taxable pensions and annuities in this country. Incidentally, it is illegal to pay a tax-free annuity in the United Kingdom. The tax-free part of any such agreement would be ineffective. If these were ordinary pensions from the German Government, they would have been paid less tax in Germany. Had that been done, the ordinary principles of double Income Tax relief would have been applicable and the rate of tax falling on them here would have been either nothing or very little. But as a result of the present law, the relief which the Germans have given by freeing these pensioners from tax in Germany is taken from them in this country. Why should we take advantage of something done by the German Government for the benefit of these people?
The obvious remedy is to give double Income Tax relief, but we cannot do that because there is no double Income Tax.

This Clause proposes to adopt an old conveyancing device. It is true that in this country we cannot agree to pay a net annual sum, but we can legally agree to pay such a sum which after the deduction of Income Tax, will leave the required amount, which is what the Clause does. I understand that the appropriate amount of German income tax on these annuities would be at the rate of 25 per cent. if they were subject to tax in the ordinary way at 5s. in the £.
The Clause proposes that we should notionally add back to the annuity 5s. for every 15s. of the annuity. In other words, we should notionally add back one-third of the annuity. We should then assume that the German Government have taken that notional addition in German tax, and on that we should work a double Income Tax relief scheme. The result would be to leave the annuity more or less net in the hands of the annuitant.
That is not as complicated as it sounds. It has the advantage that it does not infringe the principle which has hitherto, rightly, prevented justice from being done. I do not for a moment suppose that a Clause of this kind will be watertight and adequate to suit the Treasury's needs, but I hope that as a result of the debate the House of Commons will indicate that it approves the principle of the Clause. If it did that, it would then be open to the Government to take the necessary steps to bring forward an Order, which is the ordinary way of making changes in the law dealing with double Income Tax relief, and that Order could be discussed and negotiated with the German authorities.
I very much hope that my right hon. Friend or my hon. Friend—whoever replies to the debate—will indicate that he agrees with this approach in principle and that, as a result of the debate, he will take the necessary action to restore these sums which should not be taken from these victims and to see that justice is done in a way in which every other country in the world has seen fit to do it.

The Temporary Chairman (Sir Norman Hulbert): I understand that the Committee will discuss, with this new Clause, the new Clause in the name of the hon.


Member for Orkney and Shetland (Mr. Grimond)—" Exemption from taxation of payments of compensation to victims of Nazi oppression"—and that in the name of the hon. Member for Dewsbury (Mr. Ginsburg)-" Limitation of taxation of payments of compensation to victims of Nazi oppression."

Mr. Grimond: We can, fortunately, save a good deal of time in the discussion by referring to the debate which the hon. Member for Hendon, South (Sir H. Lucas-Tooth) mentioned, the debate of 1957. In the course of his reply to that debate, the hon. Member for Wolverhampton, South-West (Mr. Powell) explained why the Treasury found it impossible to exempt the victims of Nazi persecution from tax because in so doing it would be putting them in a preferential position as against widows whose husbands had suffered at the hands of the Germans and who had clearly as good a claim. He also explained that there were several classes of these annuitants and that one class was in any case not liable for tax.
On that occasion the House—it was discussed in the House—was impressed by the arguments advanced both by the hon. Member for Wolverhampton, South-West and by the hon. Member for Sowerby (Mr. Houghton), but it seemed to me that the Treasury made it clear that it was most sympathetic to the position of these refugees.
It seemed to me, and obviously to many others, that the time had come to discuss the matter again and to see whether any way could be found of helping these people. For that reason I put down the new Clause which stands in my name and the names of my hon. Friends. I agree that it is substantially the same as that discussed in 1957 and that it may well be thought to be rather too wide. If that is the case and if the Government feel more sympathetic to the approach of the hon. Member for Hendon, South, I should be most happy to support his Clause. He has developed an argument which he advanced in the previous debate, based on the supposition that the annuities, at least in some cases, are paid on the assumption that they will not be taxed and have been reduced on that assumption, in spite of the fact that in this country they are

liable to tax. It was then mentioned—it is worth mentioning again—that in most countries they are not liable to tax.
1.45 a.m.
This matter was also considered in the debate, but it was then argued on behalf of the Government that the Treasury could not look at the circumstances in which the income arose. It had to take it as it came. I do not know whether the Treasury sticks to that position. If the Treasury is prepared to make some exception from that position, this would seem to be a way in which we could do something, which most hon. Members would want to do, to assist the unfortunate victims of the Nazis.
It was suggested with some truth that there is a certain capital element in these payments. Although it may be rather difficult to distinguish in all cases, in some cases this property should not be treated as income.
I shall quite understand if the Government say that my new Clause is too wide, but I should be very happy to think that the Treasury may be able to go at least some way to meet the general wishes of the Committee. The Government should give serious consideration to the line of thought advanced by the hon. Member for Hendon, South.

Sir Henry d'Avigdor-Goldsmid: The hour is late, but it is not too late to do justice and the right thing. The points advanced by my hon. Friend the Member for Hendon, South (Sir H. Lucas-Tooth) and the hon. Member for Orkney and Shetland (Mr. Grimond) need not be repeated. However, I want to make it clear that these payments are made under an agreement of 1952 when the financial position of the German Government was far different from their position today. The Convention between the allied nations and the German Government required them to pay
adequate compensation to persons persecuted
for their political convictions, race, faith or ideology…
The German Government, in introducing the Bill in their own Parliament, stated that they were not able to pay full compensation. Consequently capital payments, as well as annuities, had to be severely restricted.
Further, the German Government, when negotiating double taxation conventions, asked the countries concerned to refrain from taxing these compensation payment. The Governments of Austria, Denmark, France, Ireland, the Netherlands, Norway, Sweden, Switzerland and the United States of America did not hesitate to give their consent.
It may well be argued by the Treasury that there is no precedent for treating under double taxation agreement payments which do not suffer tax. I remind my hon. Friend the Financial Secretary of the Anglo-Swiss Convention, which exempts from United Kingdom tax
pensions, paid by, or out of funds created by, the Swiss Confederation or by any Swiss Canton to an individual in respect of services rendered to Switzerland in the discharge of governmental functions".
The exemption is not dependent upon the pension being subject to tax in Switzerland.
I hope that that is sufficient to convince my hon. Friend that, if he accepts the principle behind the Clause, he is not instituting a new canon in British taxation law.
Jews throughout the world realise that their continued existence as a nation depended perhaps more on this country than any other, and the stand taken by this country from the days of Hitler onwards is a thing that no Jewish person should forget.
The record should be kept clean. The effect of that act of generosity in affording asylum to very large numbers of refugees from Nazi oppression—and it was real generosity—and the effect of the courage and determination in 1940, are today being vitiated by what can only be described as the niggling attitude of the Treasury. We have an opportunity now, at virtually no cost to the Exchequer—or at a very small cost and one which, by its nature, cannot continue long, because the people in receipt of these annuities are, of necessity, old—of putting that record right. I hope that when he replies my hon. Friend will remember that if he falls in with the spirit of the new Clause, he will be living up to the tradition of the great days of 1940.

Mr. David Ginsburg: In speaking in support of the new Clause standing in the names of myself and my

hon. and right hon. Friends I shall endeavour to be appropriately brief, and keep in with the spirit of the discussion that has taken place so far this morning. Nevertheless, this is a very serious and important topic, and a number of things need to be said.
This new Clause is not dissimilar to those that have already been moved or spoken to, but there are two points to which I should like to draw attention. My Clause seeks to restrict the relief to items that are specifically the subject of exemption from tax in Germany. There are compensation payments coming from Germany that are not subject to German tax relief, and it is no purpose of ours that such income payments should be relieved of Income Tax in this country. Further, it is suggested that a limit of £500 per annum should be considered, after which British Income Tax would have to be borne by such annuities.
The Committee is perhaps entitled to ask why this matter is being discussed at the present time. There are a number of important reasons. First of all, it is quite clear that there is considerable dissatisfaction with the decision which the Government made in 1957 not to exempt such payments from British Income Tax. Secondly, one very significant new factor has since developed, and that is the consistent and, one must concede, praiseworthy pressure put by the German Government on the British Government in an effort to modify Her Majesty's Government's policy. A third and not unimportant factor is that we are now at the conclusion of the World Refugee Year, which gives Her Majesty's Government an opportunity to make a gesture in the spirit of that occasion.
Finally, the Treasury is under new management as compared with 1957. Whatever our political disagreements with the Chancellor may be, he is respected as a fair-minded and humane man—

Viscount Hinchingbrooke: Was not his predecessor?

Mr. Ginsburg: I was not making any attack on his predecessor. I was saying that whatever may be our political differences with the present Chancellor, he is respected as a very humane and fair-minded man. One hopes that in such a situation as this there will be


compassion from him because, basically, this issue is moral, rather than technical or financial.
As all Members recognise, the country has a fine record of giving asylum to refugees of all faiths, races and nationalities, and I am sure that no refugee would wish to escape his tax obligation to the country which has given him asylum and a home. On the other hand, my own reaction, and I think the reaction of many people in all walks of life, is that the continued decision of Her Majesty's Government to tax payments of this kind does not correspond with the principle of fair play and fair-mindedness which we always try to practise in these matters.
We are also entitled to consider whether the Revenue would be prejudiced by a decision of this kind. It is my belief—and I believe the Financial Secretary will confirm—that a concession in this matter would surely not prejudice the revenue position of the country. He and I have had some correspondence. He is not in a position to inform me of what the revenue loss would be if a concession were given because I think it is fair to say that the necessary statistics are not available. But I take comfort from the fact that if statistics are not available, that is a sign that the problem is statistically rather small. Indeed, it is true to say that there are probably about 5,000 annuitants at the most—and, as the hon. Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) said, rather old people—who are involved.
I feel that the question is mainly a moral one. On the other hand, the Government have adduced a number of technical reasons for so far resisting an improvement in this problem. In particular, they argue that a concession in this field would undermine our tax structure by being unfair to other categories of income. That is an argument in terms of equity, and one is also entitled to say, in as uncontentious a way as possible, that not all the arguments of equity fall in the Government's direction.
I think the Financial Secretary will confirm that the capital payments which are made to victims of Nazi persecution are not subject to tax. On the other

hand, it is payments of annuities which are subject to tax. I would simply make the point that annuities have, in the main, been chosen by the poorest and oldest elements in the refugee population. So one is faced with the fact that the Government's decision to tax these payments has serious inequitable consequences, and I do not believe that that was the intention at the time.
The second consideration, which has already been mentioned, is that the Government are profiting at the expense of the German taxpayer, because it is the German Government who are forgoing their tax rights in this matter.

Sir H. Lucas-Tooth: Not at the expense of the German taxpayer but the German taxpayer's beneficiary, the victim.

Mr. Ginsburg: I take the point. However, it should be remembered that when these sums of compensation were negotiated in Germany between the German Government and the refugee organisations it was an assumption in those negotiations that these sums would be tax-free, and, although this is a matter which concerns a foreign country, it is arguable that had the parties to those negotiations realised that in this country alone tax would be levied, it is conceivable that a different level of compensation would have been arrived at.
2.0 a.m.
One final technical argument should also be adduced. The Government are pleading for consistency with our own tax structure, and the centre of the Government case up to now, and I hope I am not misrepresenting it, is the issue of the British war widow. They argue that it would be unfair to let the compensation payments to victims of Nazi persecution be tax free while the pension of the British war widow is taxed.
There is strong force in that argument, but one is also entitled to carry it a little further because it gets us into certain difficulties. Whereas one concedes that there is a parallel in suffering between these categories of people, it is not correct to say that there is a parallel between the British war widow and another group who are affected by this, namely, the victim of Nazi persecution


whose career was damaged and blighted. When the Government get to that point they proceed to say that the parallel of the person who had his career damaged and blighted is no longer the war widow but the person who has lost his job. While there is a parallel in suffering between the first two categories, there is no parallel in human suffering between the person whose career was ruined before the war and the person who, as a result of a take-over bid, lost his job and got compensation in terms of an annuity.
The matter of the war widow was last raised in 1957 and since then there have been certain changes. The rate of the war widow's pension has increased since the time the hon. Member for Wolverhampton, South-West (Mr. Enoch Powell) spoke on this matter, and in this Bill tax relief is being given by the Government to widows. One is entitled to point out that in the meantime there is no change in the financial position of refugees from Nazism, and the Government cannot do anything about that because the payments are coming from Germany.
I do not propose to say more about this now. I do not claim any author's pride so far as our new Clause is concerned. I would be quite happy, speaking for myself, with the Clause which has been so ably moved by the hon. Baronet, the Member for Hendon, South (Sir Hugh Lucas-Tooth); or alternatively, if we got some friendly assurance from the Government that they will look at the matter again and proceed perhaps by an administrative concession, although I realise there are difficulties there; Or if the Government were willing to try to resume negotiations with the German Government so that justice might be done to a small section of the community who, in all conscience, have suffered enough.

Mr. Skeet: I had a lot of correspondence with the Financial Secretary on matters raised by a constituent two months ago and have appreciated his courtesy. Certain anomalies remain and I would like to read one extract from a constituent's letter:
I understand that not only is the pension liable to Income Tax but also it is regarded as unearned income. Moreover, the commission of eight per cent., which is paid for obtaining the arrears of this pension is also taxed at the same rate although this amount

of eight per cent. is not, in fact, received by the pensioner. I am informed that in nearly every other country (including the U.S.A.) no tax is levied on such payments.
It is quite obvious in this case that unearned income allowance is not permitted to anybody who receives an annuity from the West German Government. In the United States there is consistency in the tax code for the simple reason that many annuitants are spared tax. We in the United Kingdom are not in this advantageous position.
In a number of cases a taxpayer has the option of receiving a capital sum and if he does so under our law he is not liable to pay tax, yet in a case such as this if he exercises an option in favour of periodic payments, he is liable to tax. This naturally presupposes that the taxpayer is cognisant of his rights. But it is not customary for the Treasury to advise him in advance. The result is that an ill-advised choice may mean misery for the taxpayer and a windfall for the Treasury.
It was argued on a previous occasion that uniformity in the tax code was important. What matters was the form of payment and not the derivation of the funds. But surely every rule must admit of exceptions in exceptional circumstances. It seems to me that this is an outstanding case where the annuity was not earned in the normal course but at the price of a great deal of suffering. These losses were incurred not in peace, but in war. Our tax laws are riddled with anomalies. No harm would be done if we had occasionally a "rational inconsistency" which would make the fiscal system a little more amenable to the taxpayer.

Mr. Janner: I am not anxious to detain the Committee but I hope that it will bear with me for a few moments if I say that it is quite inconceivable that any tax should be imposed at all on these annuities. In the exceptional circumstances in which these annuities are paid I cannot understand how they can be reasonably or morally associated with any ordinary question of taxation or relief from taxation. It is ridiculous to say that people, whether Jewish or non-Jewish, who for racial reasons suffered persecution should have whatever compensation is paid to them by those who were responsible for these crimes subjected to tax.
This compensation really amounts to the payment of a capital sum, but quite apart from and in spite of any legalistic arguments the position is that these victims passed through the most horrific experiences that can possibly be conceived, and this question bears no comparison with anything with which we deal in the course of the Finance Bill or other financial matters.
A man who has been the victim of these crimes is not in a position to obtain compensation for what happened to him and for all the losses he sustained. He was probably subject to losses which are quite unascertainable, and his family and everybody connected with him were probably murdered in his sight. How can we expect that man to believe that, while the whole world is prepared not to charge a tax on the payments, our country, which stands so high in the estimation of all reasonable human beings throughout the world, cannot find some formula which will enable us to do the same as the other nations do? I must say that I cannot for the life of me understand it.
I find it hard, too, to try to describe in anything like appropriate terms what the position really was. I ask hon. Members to recall the fact the House stood in silence here on an occasion unprecedented in the history of the House of Commons when those atrocities were being committed. That was not regarded as being technically incorrect—although I suppose that in fact it really was not in accordance with the rules of the House. So who for a moment can suggest that we in the House of Commons or this Committee have not the right to deviate—even if we call it a deviation—from the ordinary rules of taxation in order to cope with a position of this sort?
I do not speak theoretically on this matter. I know a good deal about it. I have dealt with questions of compensating victims for many years. I know them from my own practice. The hon. Member referred to people being ignorant of the fact that the compensation would be taxed if it was an annuity. I can assure him that not only is that the case, but they are astonished when they are called upon to pay the tax. Sometimes they are then placed in very con-considerable difficulty, because, having

relied on the fact that they were to receive this compensation, they entered into commitments. I could give instances—at least one instance of a person who was placed, and is placed, in a very serious position because, believing it was impossible for anyone to deduct tax from these sums, he entered into commitments which today are impossible for him to meet.
That may be that ignorance of the position is not in law permissible, but surely, in cases of this sort we cannot stand, and should not stand, on the letter of the law and extract from the moneys which are brought into this country, foreign currency, some portion—it is really a miserable portion—for the purpose of our own Treasury. The position has been put properly by my hon. Friend, that the amounts paid in respect of pensions are naturally being increased, but these amounts are not being and have not been increased. I cannot believe that any person who is receiving some kind of compensation annuity in this country would find it in his heart to utilise the argument that a concession made to the victims of persecution should be stopped because he himself is not getting an annuity free of tax.
I hope that the expressions of sympathy which, I am sure, will come from the Treasury, will be accompanied by something more—by the realisation that we can follow in the footsteps of the rest of the world by not exacting this tax and thus continue to set an example instead of being behind world opinion.

2.15 a.m.

Mr. Houghton: I am sure that the whole Committee will approach this matter with the utmost sympathy and the Committee will wish to be fair and more than fair, generous, to those who suffered grievously in the persecutions of the Nazi régime.
Reference has been made to the debate held on 16th July,. 1957, when I followed the hon. Member for Wolverhampton, South-West (Mr. Powell), who was then the Financial Secretary. I approved of his fiscal policy in the matter of taxation of annuities of this and similar kinds, a point of view which was not well received, to say the least, in some quarters of the Committee, including some of my hon. Friends. But


the proposal made in 1957 by the hon. and learned Member for Northwich (Mr. J. Foster) was very different from that made now and moved so ably and agreeably by the hon. Member for Hendon, South (Sir H. Lucas-Tooth).
In 1957, the proposal was to exempt all the payments from British Income Tax and Surtax and vacate any assessments made on them and make repayments of tax paid where that had been done. The proposal now before the Committee would gross up all these annuity payments by reference to the rate of German tax and then regard them as having or being eligible for double taxation relief. That is a most interesting proposal and would not conflict with the general principles of taxation which were involved in the earlier proposal.
I have some questions to put to the Financial Secretary. In The Guardian of 24th June, 1959, there was an article written by its legal correspondent. It was entitled.
Nazi victims hope for British change of heart
and it said:
An attempt to ensure that the victims of Nazi persecution now living in Britain receive their compensation from the Federal German Republic free of tax is to be made next month.
When the British and German revenue authorities meet to consider the provisions of the existing Anglo-German double taxation convention, the Germans will propose an amendment to this effect. At present all annuities paid to these refugees in Britain are subject to United Kingdom tax.
The article went on to say:
It has been suggested privately to the German authorities that Germany should introduce legislation which would increase the amount of annuities to refugees in Britain proportionate to the amount of tax levied by the British revenue. The German Government has replied that this is neither administratively possible nor politically feasible.
Following that article, there was a leading article in The Guardian in similar strain on 11th August, 1959, apparently anticipating that some negotiations then in progress would bring about a change in the situation.
Then I noticed after our debate in 1957 a most interesting article in the Accountant of 29th March, 1958, on the taxation of German pensions. That raised some interesting points under the existing double taxation agreement with

the Federal Republic of Germany of 1955, Statutory Instrument, No. 1203.
Article IX (1) of that Convention provided that
Remuneration, including pensions, paid, in respect of present or past services or work, out of public funds of one of the Contracting Parties shall be exempt from tax in the territory of the other Contracting Party, unless the individual concerned is a national of that other Party without being also a national of the first-mentioned Party.
This article suggested that by that provision non-British subjects, including Stateless persons, in this country receiving annuities from Germany should be exempt from United Kingdom taxation under Article IX (1) of the 1955 Convention. It also went on to say:
Although in many cases these victims of Nazi persecution have since taken British nationality that of itself does not relieve them of German nationality and therefore those who are British subjects and who retain their German nationality would similarly be covered by the Article of the 1955 Convention,
which I have mentioned.
That left only one point of possible dispute, which was which annuities were being
…paid in respect of present or past services or work out of public funds of one of the Contracting Parties…
Whether that covered only pensioners of the West German Government, or whether all persons who were getting compensation for past services or work would be covered because the annuities were being paid out of the funds of the Federal Republic, were questions raised in the article.
I am sure that the Committee would be glad to know what all this amounts to. I am sure that hon. Members must have studied this, and in particular that the Committee would wish to know whether there was anything in this report of pending discussions on a new convention, and, if so, what has been the result and what have been the exchanges between Her Majesty's Government and the Government of the Federal German Republic. This seems now to have passed out of the field of the simple issue of tax at normal rates and exemption from United Kingdom Income Tax. It has gone into the field of some mutual adjustment or agreement between the Governments concerned.
I realise, of course, that what I am now raising—reference to certain types of annuities under the Convention of 1955—does not cover the whole field of these annuities. The hon. Member for Wolverhampton, South-West described to the Committee in 1957 the four different categories of annuities being received by the victims in this country of Nazi persecution. He made it very clear in the debate on 16th July, 1957, that persons who have suffered injury to body or health and who are receiving annuities to compensate them for injuries to body or health receive them free of United Kingdom Income Tax.
So they are out, and yet I notice that they are in the new Clause, which surprises me. That refers to compensation for loss of or damage to life, limb, health, etc. If what we heard in July, 1957, is the true position—I have no reason to doubt it—then we can be comforted by the fact that annuities paid for that type of injury are outside the grasp of the tax gatherers in this country.

Sir H. Lucas-Tooth: I put the words in following some document I was referring to. I put them in because it would not necessarily be those directly concerned whom we should consider; it might be their dependants.

Mr. Houghton: I am coming to the question of dependants.
The second category of annuities referred to by the then Financial Secretary in July, 1957, were annuities for loss of pension rights. They come in a different class. The claim could scarcely be made for complete exemption from United Kingdom tax of annuities paid for loss of pension rights. Pensions are taxable in this country. Whether there should be some adjustment of the amount of tax collected from the net amount in the hands of the recipient, by reference to the tax position, is another matter, but I suggest that the new Clause is much more appropriate to the position of annuities for loss of pension rights than was the new Clause proposed by the hon. and learned Member for Northwich (Mr. J. Foster) in 1957.
I grant at once that pensions are treated as earned income, whereas annuities for the loss of pension rights probably are not. Although the then Financial Secretary said they would be subject to tax in

the same way as a normal pension, he added that this class of case had not actually been referred to the Inland Revenue as to their entitlement for earned income relief. I thought it was strange at the time, and it must be stranger still if nothing has been done in the meantime.
The next category consists of annuities to widows and relatives of those who, unhappily and grievously, lost their lives. This is where we come to the parallel with the British widows' pension. In passing, it must be remarked that a number of countries, if not all, which exempt these annuities from their Income Tax, at the same time exempt the pensions of war widows of their own nationals, whereas we do not. This is just an anomaly which confronts us, and we have to acknowledge it. Finally, there are annuity payments for loss of office or dismissal from employment.
I hope that the Financial Secretary can throw some light on the situation. It seems to be somewhat confused, and in some respects obscure. We are all uneasy about the position. I am sure that the Committee will wish for the most sympathetic reply from the Financial Secretary, and will welcome the fullest information he can give.

Sir E. Boyle: I cannot help regretting that this group of Clauses is being discussed at this late hour, although I realise that that is nobody's fault. This is an important subject, and I am in a somewhat personal difficulty, in that by this hour of the day, at short range, one eye does not function at all and the other only erratically.
But I would like to say at the start of my remarks that this is an important subject—not only, as my hon. Friend the Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) said, because the fact that this country stood alone in 1940 was of very great importance to the Jewish nation, but—and this is not so often remembered—because the Commonwealth, as we know it today, and the whole great association of nations forming it, could never have been created without the support Britain had from Jewish financiers in the seventeenth and eighteenth centuries.
The resources of the Treasury and the Bank of England in those days would not have been sufficient to get us through those wars which were so crucial to


Britain's history. Therefore, the Committee must carefully examine this important subject, in respect of which justice must be done.
This matter was discussed in 1957 and, in principle, I have not all that much to add tonight to what was said by my hon. Friend the Member for Wolverhampton, South-West (Mr. Powell) on that occasion. I would just say that the hon. Member for Dewsbury (Mr. Ginsburg) made some kind remarks about the present Treasury Ministers. We are coming to the first anniversary of the debate on the Hola Camp incidents, and, remembering that debate, I would not wish to compete with what was said in it by my hon. Friend the Member for Wolverhampton, South-West, in relation to the virtues attributed to Ministers.
2.30 a.m.
I think that we ought to remember that, however much sympathy may be felt for the victims of Nazi persecution, the recurrent payments of an income nature which they receive cannot honestly be exempt from Income Tax, either by statute or by some administrative concession, without creating serious anomalies. Monthly payments made in respect of physical injury or damage to health to the injured person are regarded as not liable to United Kingdom tax, but the payments to the dependants of people who have died. such as war widow's pensions and the pensions of widows generally, are liable to United Kingdom tax. I think that the United Kingdom war widow cannot be expected to accept the view that the position of the widow of a person who lost his life as a result of Nazi persecution differs in principle from her own.
The hon. Member for Sowerby (Mr. Houghton) asked about the negotiations on this subject last year. I will tell him all I know about it and give the hon. Member what information is in my possession. There were discussions last year about proposed amendments to the Double Taxation Agreement between the United Kingdom and Germany, and the German representatives suggested that there should be an amendment introduced under which Germany would retain the right to tax the pension payments, and the United Kingdom, recognising that right, would give up its right to tax. The idea was that Germany

would not exercise her right and the payments would in practice go free.
The representatives of the Inland Revenue refused to accept that provision on three grounds. The first was that it was wrong in principle to accept payments of that kind; secondly, that this question scarcely came within the scope of a double taxation agreement since there was really no question of double taxation involved; and, thirdly,—I put this frankly to the Committee—that here there is a constitutional point of substance.
Quite apart from the merits of the case, it would not be right by such means to circumvent a decision of the United Kingdom Parliament that the compensation should remain liable to United Kingdom tax. The last time we discussed this matter, in 1957, the House of Commons had taken a decision, and in my view the representatives of the Revenue were right to respect that decision when it came to those negotiations. I consider that a right constitutional point for the Revenue to have taken.

Mr. Houghton: Parliament could assist the Revenue by putting that right.

Sir E. Boyle: The Committee is entitled to take a decision now. I am merely reporting what was done in 1959 and why.
The hon. Member was correct when he said that if the individual takes a lump sum, that is a capital receipt and not subject to tax. I think that there is a point of importance to remember, namely, that the annuity in these cases does not bear an actuarial equivalent to the lump sum, and that in some cases the annuity is considerably larger than the life annuity which could have been purchased with the lump sum. So, in many cases, it may well happen that the annuity, even after it has been taxed, is worth more than a life annuity which could have been bought, although the latter would be taxed only on so much as was not a return of capital.
I have considered these three Clauses. The hon. Member for Orkney and Shetland (Mr. Grimond) said that his was the 1957 Clause all over again, and on that point I do not think the Committee would wish to consider a different decision for the reasons which were explained in 1957. I do not think that


I will deal with the half-way house, as it were, of the hon. Member for Dewsbury, not out of disrespect to the hon. Member, but because I do not think that that is the most considered of the three Clauses.
The most important Clause was that moved by my hon. Friend the Member for Hendon South (Sir H. Lucas-Tooth) and praised by the hon. Member for Sowerby. Even though the hour is so late, I should like to consider it for a few minutes. Its object is to treat certain annuities received from the Federal German Government by victims of Nazi oppression as payments from which notional German tax has been deducted, and to provide for the notional German tax to rank for double taxation relief.
The hon. Member for Sowerby got it right when he said that the payments in question would be deemed to be "grossed" at the notional German rate, thus increasing the total income, but that the allowance of double taxation relief would ordinarily have the effect of exempting them from any liability to United Kingdom tax, or, alternatively, if the United Kingdom effective rate of tax were higher than the notional German rate, of limiting the United Kingdom tax to the difference between the two rates. The net result in most cases would be to give a measure of relief which would be more limited than exemption from United Kingdom tax of compensation payments to Nazi victims, which is proposed in the new Clause of the hon. Member for Orkney and Shetland.
I have considered this Clause very carefully, because my hon. Friend has obviously taken a good deal of trouble in devising it, and I realise that he and his hon. Friends feel that it is less objectionable in principle than complete exemption and represents a fair approach. I still feel, however, that it is open to the same fundamental objection that it involves giving what is in effect a special relief to a particular class of taxpayer.
My right hon. Friend and I have tried to consider this Clause as carefully as we could. It is quite true that under the present proposal the relief looks like a simple extension of an existing relief, but the trouble is that the conception which underlies this proposal is artificial,

because it involves deeming a United Kingdom resident to have paid German tax which, in fact, he has not paid and which is not chargeable. I accept that it can be argued that, if the Germans had awarded a greater gross sum and then imposed tax on it, the recipient would have received the same net amount and the United Kingdom would have had to give double taxation relief to the United Kingdom resident for the German tax. But, in practice, that is not necessarily true, because under the Anglo-German Double Taxation Agreement a United Kingdom resident receiving an annuity from German sources might well be entitled to exemption from German tax.
In any case, I am not sure how far that argument would carry us, because any taxation code—and the whole basis on which we have argued this question throughout is that we must have regard to the British tax code—must have regard to taxes as they are and not as they might have been if an overseas Government had acted differently. That is the difficulty about this Clause. It appears to be an extension of an existing relief, but it can be regarded as an existing relief only by the device of treating as paid something which in fact has not been paid.
I recognise that these must seem technical grounds, but it is on these grounds that I ask the Committee to reject the Clause. This is a matter which causes the Committee some disquiet. It is always a difficult position when, on the one hand, you may be creating an anomaly and a sense of injustice between one individual and another according to the tax code of our own country, but, on the other, I recognise that Nazi persecution is something very different, fortunately, from most things which the modern world has known. Weighing everything up, however, I can only recommend the Committee to reject the Clause, but I do so with regret, and I should like to end by congratulating my hon. Friend on the care which he has obviously taken and the great effort which he has made to devise a means of getting round this difficulty, even though I am bound to conclude that he has been unsuccessful.

Mr. Janner: Has the hon. Gentleman taken any opportunity of consulting


with other members of the Commonwealth, the United States and other civilised nations, which have allowed these payments to be free of taxation, with a view to ascertaining how they found it consistent with their fiscal policies? That might help him at a later stage to agree to some arrangement by which the relief can be given.

Sir E. Boyle: I can certainly give the hon. Gentleman the assurance that in all our future studies of this problem we will gain as much help as we can by considering the position of other countries, though we are up against a distinctly difficult problem. I do not rule out trying to gain greater knowledge of the way in which these matters are solved by other countries.

Mr. Ginsburg: I am sorry to press the Financial Secretary, but having advised the Committee to reject the Clause, he goes on to talk about future studies of the problem. What does he mean by that? Does he mean that the Government's mind is not entirely closed to some concession? Is he thinking in terms of further talks with the German Government?

Sir E. Boyle: I cannot in any way go back on the recommendation which I made to the Committee about these Clauses this evening. After all, this matter has been considered over a number of years. Hon. Members, including the hon. Member for Dewsbury and my hon. Friend the Member for Willesden, East (Mr. Skeet), have written to me about it. I have no doubt that I shall receive further correspondence and perhaps further deputations on the subject in the years to come. It would be most presumptuous for anyone in my position standing at the Dispatch Box tonight to say that we have studied the subject as far as we ever mean to.

Mr. Powell: Despite the references which have been made to arguments which it fell to me to put to the Committee three years ago and despite the way in which my hon. Friend the Financial Secretary went out of his way to pay a personal compliment to me, I am disappointed by my hon. Friend's conclusion.
We must recognise that the device proposed to the Committee by my hon. Friend the Member for Hendon, South

(Sir H. Lucas-Tooth) is a device. It is a device designed to bring about, without violence to our general rules of taxation, the result which I believe all hon. Members of the Committee desire and which I assume the Government desire.
I had hoped that it would have been felt that it was not necessary to look behind the assumptions underlying the device, but to accept it as a means of escaping from the difficulty. It is a means which I do not think would have been found offensive by those other categories of persons whose situation has so often come into question when considering this subject.
It is one of the qualities of which we often pride ourselves in this country that we are able to deal with difficulties by means of making assumptions—by devices of very much the kind my hon. Friend the Member for Hendon, South has proposed.
I press my hon. Friends to reconsider their decision on this, because this device—it is admittedly a device—sufficiently and justifiably holds water for us to be able to achieve our common purpose.

Mr. Houghton: I support the appeal made by the hon. Member for Wolverhampton, South-West (Mr. Powell). We know that in same of our affairs we treat something as having been paid or deemed to have been paid. The way in which we find ways and means of overcoming technical difficulties is the genius of our legislation and administration.
We were all rather surprised to learn that in our innocence on 16th July, 1957, by our formal act of negativing the Clause then moved we provided some constitutional reason which the Inland Revenue was able to use with all its force and majesty. We had no idea that we were doing anything so profoundly important constitutionally when Mr. Speaker put the new Clause and, without a Division, we negatived that new Clause.
We shall have to be more careful what we do in future, or we shall find that to the Executive or, indeed, lower down still, our actions are insuperable obstacles in the way of their doing sensible business with a foreign Power. I hope that the Financial Secretary can keep the


matter alive, and I warn him that we might ask for some information about the numbers of assessments existing under the various categories so that we can get closer to the problem. For example, we have not yet heard whether some of these annuities have been exempted under the Convention of 1955 or other escape clauses that may exist.
2.45 a.m.
It all needs a thorough survey before we can be satisfied to let the Financial Secretary throw up his hands here tonight and say that he has done his best and cannot do any more, but congratulates the hon. Member for Hendon, South (Sir H. Lucas-Tooth) on the way that he moved the new Clause. I must say that that seemed to be a gratuitous piece of butter plastered over the hon. Gentleman after having rejected his main purpose.
We are disappointed, and I hope that the Financial Secretary will realise that before we proceed further we must try to understand the implications of what we are about to do. There is a new Clause before the Committee. How are we to deal with it? Is Parliament, once again, to reach an unfavourable decision on a proposal Which the Inland Revenue will throw in with the kitchen sink when it has its further negotiations with the German Government?

Mr. Grimond: I am not able to agree entirely with the constitutional argument of the hon. Member for Sowerby (Mr. Houghton) because I think that Parliament must 'be deemed to want the natural consequences of its acts. However, what I wanted to ask was this. The hon. Gentleman asked a question of the Financial Secretary as to whether the class of case that in 1957 had not been referred to the Inland Revenue has since been referred. Did he get an answer?

Mr. Houghton: No, I did not.

Sir E. Boyle: I cannot answer that question straight away this evening, but I shall do so as soon as possible.

Sir H. Lucas-Tooth: I would assure the hon. Member for Sowerby (Mr. Houghton) that I have been a Member of the House too long to be overwhelmed by butter, however much of it is thrown at me. I do, however, feel in

some difficulty about this. If I had thought it would serve a useful purpose I would have been willing to have gone into the Division Lobby against the Government. On the other hand, I think that a Division at this time of night would be undesirable and somewhat unreal.
I had appreciated, while my hon. Friend was speaking, the exact nature of the constitutional point put by the hon. Member, and I was wondering what was the best course to take in the circumstances. As I understand the position, in the discussions that took place with the German Government the point was made—and I think that this was the effect of my hon. Friend's speech—that the British Government were bound, to some extent at all events, by the decision taken by Parliament when a previous Clause was negatived without a Division.
I do not at all want that position to remain and be fortified. On the other hand, it appears to me that this evening, at any rate, anyone considering the debate would feel fairly sure that the opinion of this House of Parliament is strongly to the effect that something ought to be done. For that reason, I hope that as a result of this debate there may be further discussions, and in order to prevent any possibility of it being said that this House has taken a decision, Sir William, I beg to ask leave to withdraw the new Clause, leaving the impression as strongly as I can that the Committee is in favour of some action being taken.

Motion and Clause, by leave, withdrawn.

New Clause.—(EXCESS PROFITS TAX: TIME LIMIT FOR ASSESSMENTS.)

(1) No assessment to excess profits tax shall be made more than six years after the end of the chargeable accounting period in respect of which it is made, except where any form of fraud or wilful default has been committed in connection with or in relation to excess profits tax, and the assessment is made for the purpose of making good to the Crown any loss of tax attributable to fraud or wilful default.

(2) In this section "assessment" includes an additional assessment.—[Mr. Powell.]

Brought up, and read the First time.

Mr. Powell: I beg to move, That the Clause be read a Second time.
Two years ago, in Section 27 of the Finance Bill, 1958, it was decided that except in cases of fraud or wilful default, assessments for Profits Tax should not be raised for years of assessment lying further back than six years—the normal time of limitation in tax matters. In making fiat provision, however, the Committee omitted to include the Excess Profits Tax, with the consequence that although Excess Profits Tax is not a present charge, it is still, at any rate in theory, open to the Revenue to go back without limitation and raise assessments of Excess Profits Tax even where there is no question of fraud or wilful default. I cannot believe that this was the intention, and I suggest that it was by an oversight that this omission was made and that it ought now to be repaired.
I ought perhaps to point out that the new Clause which I am moving is necessarily imperfect, in the only form in which I can submit it, due to the fact that we are operating under the general Resolution and, therefore, have no power to propose anything which could conceivably in any way increase the charge. I am aware that for the proper carrying into effect of what I am asking for, it would be necessary to have a more extensive provision, some aspects of which could be interpreted in that light.
Therefore, I ask my hon. Friend to accept the intention of this Clause, which is to repair the omission made in 1958 and to undertake to make the necessary amendments which the Government alone can do at the next stage of this Bill.

Sir E. Boyle: I must say that the proposal of my hon. Friend the Member for Wolverhampton, South-West (Mr. Powell), that a time limit should be imposed on Excess Profits Tax assessments, cannot be regarded in principle as an unreasonable proposal. The tax was brought to an end, I think, more than thirteen years ago. There are very few Excess Profits Tax cases today still outstanding, and I imagine that many which are outstanding would be excluded from the benefit of the proposed time limit by the exception for fraud or wilful default.
However, there are two slight difficulties about this, one of which my hon. Friend did not mention. While we are about it, there are two other taxes which are likewise without time limit and which

we ought to consider at the same time—the Excess Profits Levy which some of us in the 1951 Parliament will remember affectionately, which ran for the two years 1952 and 1953, and something which was before I was a Member of this House, called, I believe, the Special Contribution of Sir Stafford Cripps, which was introduced in 1948 and operated for one year only. If we are to introduce a time limit for Excess Profits Tax we ought to consider the Excess Profits Levy and the Special Contribution at the same time.
Further, it is desirable that if a time limit is introduced there should be a reasonable interval of time, say, to the end of the year, before it comes into effect, to give the taxpayer and the Revenue an opportunity to clear up any outstanding cases. This was the procedure that we followed in 1958 when a six-year time limit was introduced for Profits Tax. The time limit did not come into effect until 31st December of that year.
Finally, there is the question of drafting to which my hon. Friend referred. Obviously, the imposition of a six-year time limit in 1960 is not a very artistic way of stopping the assessment of a tax which ceased to apply as long ago as December, 1946. The best way would be to indicate that no Excess Profits Tax assessments should be made after a certain date except for cases of fraud or wilful default.
My hon. Friend asked me whether my right hon. Friend would give an undertaking to introduce a new Clause on Report. I am bound to ask my hon. Friend if he could not go a little further than that. I think that this is a matter that we want to get right, and the drafting of this may be a little complicated. I know that my right hon. Friend the Chancellor would much prefer to have longer to consider this matter, to consider it before next year's Finance Bill. If we are to do this piece of tidying up legislation, for which, in principle, there is a good case, it would be better not to do it in too much of a hurry.

Mr. Powell: May I put just one point? I fully accept that while we are doing this job we should do it properly, and I can well conceive that it may be awkward to do it legislatively at this stage. But it does seem to me a reasonable corollary of the intention expressed by my hon.


Friend that he should give the Committee an assurance that there will be no assessments raised in these cases after 31st December this year, the date which we all would have written into the Bill this year if time and opportunity had served.

Sir E. Boyle: I think that my hon.
Friend's suggestion in that connection is a very reasonable one.

Mr. Enoch Powell: Then I beg to ask leave to withdraw the Motion.

Motion and Clause, by leave, withdrawn.

Seventh Schedule agreed to.

Bill reported, with Amendments; as amended, to be considered this day and to be printed. [Bill 127.]

BUILDING SOCIETIES [MONEY]

Resolution reported,
That, for the purposes of any Act of the present Session to amend the law relating to building societies, it is expedient to authorise the payment out of money provided by Parliament of any expenses incurred by the Chief Registrar of Friendly Societies in consequence of the provisions of the Act, and the payment into the Exchequer of any money received by him under the Act.

Resolution agreed to.

ADJOURNMENT

Resolved, That this House do now adjourn.—[Mr. Peel.]

Adjourned accordingly at three minutes to Three o'clock a.m.